10-K 1 ccptiii1231201210-k.htm 10-K CCPT III 12.31.2012 10-K
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________ 
Form 10-K
(Mark One)
 
 
 
 
 
x
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 For the fiscal year ended December 31, 2012
 
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 For the transition period from          to
Commission file number 000-53960 
COLE CREDIT PROPERTY TRUST III, INC.
(Exact name of registrant as specified in its charter)
 Maryland
 
 26-1846406
 (State or other jurisdiction of
incorporation or organization)
 
 (I.R.S. Employer
Identification Number)
 2325 East Camelback Road, Suite 1100
Phoenix, Arizona, 85016
(Address of principal executive offices; zip code)
 
(602) 778-8700 (Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Exchange on Which Registered
 
 
 
 None
 
 None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes o          No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes o          No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x          No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x          No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o          Accelerated filer o          Non-accelerated filer x    Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o          No x
There is no established market for the registrant’s shares of common stock. There were approximately 482.1 million shares of common stock held by non-affiliates at June 30, 2012, the last business day of the registrant’s most recently completed second fiscal quarter.
The number of shares of common stock outstanding as of March 26, 2013 was approximately 496.7 million.
Documents Incorporated by Reference:
The Registrant incorporates by reference portions of the Cole Credit Property Trust III, Inc. Definitive Proxy Statement for the 2013 Annual Meeting of Stockholders (into Items 10, 11, 12, 13 and 14 of Part III).
 



TABLE OF CONTENTS
 
 
 
 
 
 
PART I
 
ITEM 1.
 
ITEM 1A.
 
ITEM 1B.
 
ITEM 2.
 
ITEM 3.
 
ITEM 4.
 
 
 
 
 
PART II
 
ITEM 5.
 
ITEM 6.
 
ITEM 7.
 
ITEM 7A.
 
ITEM 8.
 
ITEM 9.
 
ITEM 9A.
 
ITEM 9B.
 
 
 
 
 
PART III
 
ITEM 10.
 
ITEM 11.
 
ITEM 12.
 
ITEM 13.
 
ITEM 14.
 
 
 
 
 
PART IV
 
ITEM 15.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K of Cole Credit Property Trust III, Inc., other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable by law. Such statements include, in particular, statements about our future financial and operating results, our plans, strategies, and prospects, including statements about outcomes of pending lawsuits and the benefits of the business combination transaction involving Cole Credit Property Trust III, Inc. and Cole Holdings Corporation, and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We caution readers not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date this Annual Report on Form 10-K is filed with the Securities and Exchange Commission (the “SEC”). We make no representation or warranty (express or implied) about the accuracy of any such forward-looking statements contained in this Annual Report on Form 10-K. Additionally, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. The forward-looking statements should be read in light of the risk factors identified in the Item 1A. “Risk Factors” section of this Annual Report on Form 10-K.


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PART I
ITEM 1.    BUSINESS
Formation
Cole Credit Property Trust III, Inc. (the “Company,” “we,” “our” or “us”) is a Maryland corporation formed on January 22, 2008, that elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes. We were organized to acquire and operate a diversified portfolio of core commercial real estate investments primarily consisting of necessity retail properties located throughout the United States, including U.S. protectorates. As of December 31, 2012, we owned 1,014 properties, comprising 43.1 million rentable square feet of single and multi-tenant retail and commercial space located in 47 states, including properties owned through consolidated joint venture arrangements. As of December 31, 2012, the rentable space at these properties was 99% leased. As of December 31, 2012, we also owned 29 commercial mortgage backed securities (“CMBS”) and three notes receivable. In addition, through unconsolidated joint venture arrangements, as of December 31, 2012, we had interests in 12 properties comprising 2.3 million gross rentable square feet of commercial space.
Substantially all of our business is conducted through our operating partnership, Cole REIT III Operating Partnership, LP (“CCPT III OP”), a Delaware limited partnership organized in January 2008. The Company is the sole general partner of and owns a 99.99% interest in CCPT III OP. Cole REIT Advisors III, LLC (“CR III Advisors”), the advisor to the Company, is the sole limited partner and owns an insignificant noncontrolling partnership interest of less than 0.01% of CCPT III OP.
Our sponsor, Cole Real Estate Investments, is a group of affiliated entities, which includes our advisor that has sponsored various real estate investment programs. CR III Advisors acts as our advisor pursuant to an advisory agreement. CR III Advisors is responsible for managing our affairs on a day-to-day basis, identifying and making acquisitions and investments on our behalf, and recommending an appropriate exit strategy to our board of directors. Our advisor and its affiliates also provide property management, asset management, financing, marketing, investor relations and other administrative services on our behalf. Our charter provides that our independent directors are responsible for reviewing the performance of our advisor and determining whether the compensation paid to our advisor and its affiliates is reasonable. Our agreement with CR III Advisors is for a one-year term and is reconsidered on an annual basis by our board of directors. We have no employees and rely upon our advisor and its affiliates to provide substantially all of our day-to-day management.
We ceased offering shares of common stock in our initial primary offering (the “Initial Offering”) on October 1, 2010. At the completion of the Initial Offering, a total of approximately 217.5 million shares of common stock had been issued, including approximately 211.6 million shares issued in the primary offering and approximately 5.9 million shares issued pursuant to a distribution reinvestment plan (the “DRIP”). The remaining 32.5 million unsold shares in the Initial Offering were deregistered.
On September 22, 2010, the registration statement for a follow-on offering of 275.0 million shares of our common stock (the “Follow-on Offering”) was declared effective by the SEC. We commenced sales of the common stock pursuant to the Follow-on Offering after the termination of the Initial Offering on October 1, 2010. Of the 275.0 million shares registered pursuant to the Follow-on Offering, we offered up to 250.0 million shares in our primary offering at a price of $10.00 per share and up to 25.0 million shares pursuant to the DRIP at a price of $9.50 per share. We ceased issuing shares in the Follow-on Offering on April 27, 2012. At the completion of the Follow-on Offering, a total of approximately 262.2 million shares of common stock had been issued, including approximately 242.9 million shares issued in the primary offering and approximately 19.3 million shares issued pursuant to the DRIP. The remaining 12.8 million unsold shares in the Follow-on Offering were deregistered.
In addition, we registered 75.0 million shares of common stock under the DRIP pursuant to a registration statement filed on Form S-3 (the “DRIP Offering” and collectively with the Initial Offering and Follow-on Offering, the “Offerings”), which was filed with the SEC on March 14, 2012 and automatically became effective with the SEC upon filing. We will continue to issue shares of common stock under the DRIP Offering until such time as our shares are listed on a national securities exchange or our DRIP Offering is otherwise terminated by our board of directors.
As of December 31, 2012, we had issued approximately 492.1 million shares of our common stock in the Offerings, including approximately 12.4 million shares issued in the DRIP Offering. We had aggregate gross proceeds from the Offerings of $4.9 billion (including shares sold pursuant to the DRIP) as of December 31, 2012, before share redemptions of $122.4 million and offering costs, selling commissions and dealer management fees of $463.2 million.

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On March 5, 2013, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cole Holdings Corporation (“Holdings”), CREInvestments, LLC (“Merger Sub”) and Christopher H. Cole. The Merger Agreement provides for the merger of Holdings with and into Merger Sub (the “Merger”), with Merger Sub surviving and continuing its existence under the laws of the state of Maryland as our wholly owned subsidiary. The consummation of the Merger is subject to various conditions. Upon consummation of the Merger, we intend to list our shares of common stock on the New York Stock Exchange (the “NYSE”). Refer to Note 2 to our consolidated financial statements in this Annual Report on Form 10-K for further discussion regarding the Merger.
On March 19, 2013, our board of directors received an unsolicited proposal from American Realty Capital Properties, Inc. (“ARCP”) to acquire our Company for a combination of cash and shares of ARCP common stock. The special committee of our board of directors, which consists of all of our independent directors (the “Special Committee”), reviewed the unsolicited proposal from ARCP and determined that the proposed sale to ARCP would not be in the best interests of our Company and our stockholders. Further, the Special Committee affirmed its commitment to the Merger. The Special Committee noted that Holdings is a full-scale real estate investment management firm that currently manages over $12.0 billion of real estate assets for over 160,000 individual investors represented by more than 13,000 financial advisors.
On March 27, 2013, our board of directors received a revised unsolicited proposal from ARCP to acquire our Company after the Merger, for a combination of cash and shares of ARCP common stock. The Special Committee is currently reviewing the revised proposal from ARCP.
There are no assurances that the proposed Merger will be consummated on the expected timetable, or at all. If the Merger is consummated, it is expected to increase the scope of our business and as a result our 2012 results of operations may not necessarily be representative of our future results of operations. Unless otherwise stated, all disclosures and discussion in this Form 10-K do not include the expected effects of the Merger.
Investment Objectives
Our primary investment objectives are:
•
to acquire quality commercial real estate properties, leased under long-term net leases to creditworthy tenants, which provide current operating cash flows;
•
to provide reasonably stable, current income for our stockholders through the payment of cash distributions; and
•
to provide the opportunity to participate in capital appreciation in the value of our investments.
We cannot assure investors that we will achieve these investment objectives. Our board of directors may revise our investment policies, as described below, without the concurrence of our stockholders. However, our board of directors will not amend our charter, including any investment policies that are provided in our charter, without the concurrence of a majority of the outstanding shares, except for amendments that do not adversely affect the rights, preferences and privileges of our stockholders. Our independent directors review our investment policies at least annually to determine that our policies are in the best interest of our stockholders.
Acquisition and Investment Policies
Types of Investments  
We invest primarily in income-producing necessity retail properties that are single-tenant or multi-tenant “power centers,” which are leased to national and regional creditworthy tenants under long-term net leases, and are strategically located throughout the United States and U.S. protectorates. Necessity retail properties are properties leased to retail tenants that attract consumers for everyday needs, such as pharmacies, home improvement stores, national superstores, restaurants and regional retailers.  
For over three decades, our sponsor, Cole Real Estate Investments, has developed and utilized this investment approach in acquiring and managing core commercial real estate assets primarily in the retail sector but in the office and industrial sectors as well. We believe that our sponsor’s experience in assembling real estate portfolios, which principally focus on national and regional creditworthy tenants subject to long-term leases, will provide us with a competitive advantage. In addition, our sponsor has built a business of over 350 employees, who are experienced in the various aspects of acquiring, financing and managing commercial real estate, and that our access to these resources also will provide us with an advantage.  

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We also have invested and expect to continue to invest in other income-producing properties, such as office and industrial properties, which may share certain core characteristics with our retail investments, such as a principal creditworthy tenant, a long-term net lease, and a strategic location. Investments in these types of office and industrial properties, which are essential to the business operations of the tenant, will assist in accomplishing our goal of providing investors with a relatively stable stream of current income and an opportunity for capital appreciation.
We have and expect to continue to further diversify our portfolio by making and investing in mortgage, bridge or mezzanine loans, or in participations in such loans, secured directly or indirectly by the same types of commercial properties that we may acquire directly, and we may invest in other real estate-related securities. We have and may continue to acquire properties under development or that require substantial refurbishment or renovation. We also have acquired and may continue to acquire majority or minority interests in other entities (or business units of such entities) with investment objectives similar to ours or with management, investment or development capabilities that our board of directors deems desirable or advantageous to acquire. We are also authorized to invest in preferred real estate-related equity securities. We will not forgo a high quality investment because it does not precisely fit our expected portfolio composition. Our board of directors has broad discretion to change our investment policies in order for us to achieve our investment objectives.
Many of our properties are leased to large national retailers in the chain or franchise industry, including but not limited to convenience stores, drug stores and restaurant properties or are leased to large national retailers, either standing alone as a single tenant property or as part of “power centers,” which are comprised of big box national, regional and local retailers. We also have acquired and may acquire additional grocery anchored multi-tenant retail properties. Our advisor monitors industry trends and identifies properties on our behalf that serve to provide a favorable return balanced with risk. Our management primarily targets regional or national name brand retail businesses with established track records. We generally intend to hold each property for a period in excess of five years.
We believe that our general focus on the acquisition of a large number of single-tenant and multi-tenant necessity retail properties net leased to creditworthy tenants presents lower investment risks and greater stability than other sectors of today’s commercial real estate market. By acquiring a large number of single-tenant and multi-tenant retail properties, we believe that lower than expected results of operations from one or a few investments will not necessarily preclude our ability to realize our investment objective of cash flow from our overall portfolio. We believe this approach can result in less risk to investors than an investment approach that targets other asset classes. In addition, we believe that retail properties under long-term triple net and double net leases offer a distinct investment advantage since these properties generally require less management and operating capital, have less recurring tenant turnover and, with respect to single-tenant properties, often offer superior locations that are less dependent on the financial stability of adjoining tenants. In addition, since we acquire properties that are geographically diverse, we expect to minimize the potential adverse impact of economic slowdowns or downturns in local markets. Our management believes that a portfolio consisting of both freestanding, single-tenant retail properties and multi-tenant retail properties anchored by large national retailers will enhance our liquidity opportunities for investors by making the sale of individual properties, multiple properties or our investment portfolio as a whole attractive to institutional investors and by making a possible listing of our shares attractive to the public investment community.
To the extent feasible, we seek to achieve a well-balanced portfolio diversified by geographic location, age and lease maturities of the various properties. We pursue properties leased to tenants representing a variety of retail industries to avoid concentration in any one industry. These industries include all types of retail establishments, such as big box retailers, convenience stores, drug stores and restaurant properties. Tenants of our properties also are diversified between national, regional and local brands. We generally target properties with lease terms in excess of ten years. We have acquired and may continue to acquire properties with shorter lease terms if the property is in an attractive location, if the property is difficult to replace, or if the property has other significant favorable attributes. We expect that these investments will provide long-term value by virtue of their size, location, quality and condition, and lease characteristics. We currently expect all of our acquisitions will be in the United States, including U.S. protectorates.
Many retail companies today are entering into sale-leaseback arrangements as a strategy for applying capital that would otherwise be applied to their real estate holdings to their core operating businesses. We believe that our investment strategy will enable us to take advantage of the increased emphasis on retailers’ core business operations in today’s competitive corporate environment as many retailers attempt to divest from real estate assets.
There is no limitation on the number, size or type of properties that we have acquired, or may continue to acquire, or on the percentage of net proceeds of the Offerings that may be invested in a single property. The number and mix of properties comprising our portfolio will depend upon real estate market conditions and other circumstances existing at the time we acquire properties, and the amount of proceeds raised in the Offerings.

5

We incur debt to acquire properties consistent with borrowing policies approved by our board of directors. In addition, from time to time, we have acquired and may continue to acquire some properties without financing and later incur mortgage debt secured by one or more of such properties if favorable financing terms are available. We use the proceeds from these loans to acquire additional properties. See “—Borrowing Policies” below for a more detailed description of our borrowing intentions and limitations.
Real Estate Underwriting Process
In evaluating potential property acquisitions consistent with our investment objectives, our advisor applies a well-established underwriting process to determine the creditworthiness of potential tenants. Similarly, our advisor applies credit underwriting criteria to possible new tenants when we are re-leasing properties in our portfolio. Many of the tenants of our properties are and will be national or regional retail chains that are creditworthy entities having high net worth and operating income. The underwriting process includes analyzing the financial data and other available information about the tenant, such as income statements, balance sheets, net worth, cash flow, business plans, data provided by industry credit rating services, and/or other information our advisor may deem relevant. Generally, these tenants must have a proven track record in order to meet the credit tests applied by our advisor. In addition, we may obtain guarantees of leases by the corporate parent of the tenant, in which case our advisor analyzes the creditworthiness of the guarantor.
In evaluating the credit worthiness of a tenant or prospective tenant, our advisor may not always use specific quantifiable standards, and may consider many factors, including debt rating agencies, such as Moody’s and Standard & Poor’s, and/or the proposed terms of the acquisition. When using debt rating agencies, a tenant typically will be considered creditworthy when the tenant has an “investment grade” debt rating by Moody’s Investors Service (“Moody’s”) of Baa3 or better, credit rating by Standard & Poor’s Financial Services LLC (“Standard & Poor’s”) of BBB- or better, or its payments are guaranteed by a company with such rating. Changes in tenant credit ratings, coupled with future acquisition and disposition activity, may increase or decrease our concentration of creditworthy tenants in the future. However, other factors may be present that would cause us to consider a prospective tenant creditworthy even if it does not have an investment-grade rating. Other factors our advisor may consider include the operating history of the property with such tenant or tenants, the tenant’s or tenants’ market share and track record within its industry segment, the general health and outlook of the tenant’s or tenants’ industry segment, and the lease length and terms at the time of the acquisition. 
Moody’s ratings are opinions of future relative creditworthiness based on an evaluation of franchise value, financial statement analysis and management quality. The rating given to a debt obligation describes the level of risk associated with receiving full and timely payment of principal and interest on that specific debt obligation and how that risk compares with that of all other debt obligations. The rating, therefore, measures the ability of a company to generate cash in the future.
A Moody’s debt rating of Baa3, which is the lowest investment grade rating given by Moody’s, is assigned to companies with adequate financial security. However, certain protective elements may be lacking or may be unreliable over any given period of time. A Moody’s debt rating of Aaa, which is the highest investment grade rating given by Moody’s, is assigned to companies with exceptional financial security. Thus, investment grade tenants will be judged by Moody’s to have at least adequate financial security, and will in some cases have exceptional financial security.
Standard & Poor’s assigns a credit rating to companies and to each issuance or class of debt issued by a rated company. A Standard & Poor’s credit rating of BBB-, which is the lowest investment grade rating given by Standard & Poor’s, is assigned to companies that exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the company to meet its financial commitments. A Standard & Poor’s credit rating of AAA+, which is the highest investment grade rating given by Standard & Poor’s, is assigned to companies with extremely strong capacities to meet their financial commitments. Thus, investment grade tenants will be judged by Standard & Poor’s to have at least adequate protection parameters, and will in some cases have extremely strong financial positions.

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Description of Leases  
We expect, in most instances, to continue to acquire tenant properties with existing leases. Many of our leases are what are known as triple net or double net leases. “Net” leases means leases that typically require tenants to pay all or a majority of the operating expenses, including real estate taxes, special assessments and sales and use taxes, utilities, insurance and building repairs related to the property, in addition to the lease payments. Triple net leases typically require the tenant to pay all costs associated with a property in addition to the base rent and percentage rent, if any. Double net leases typically hold the landlord responsible for the roof and structure, or other aspects of the property, while the tenant is responsible for all remaining expenses associated with the property. Triple net and double net leases help ensure the predictability and stability of our expenses, which we believe will result in greater predictability and stability of our cash distributions to stockholders. In respect of multi-tenant properties, we expect to continue to have a variety of lease arrangements with the tenants of these properties. Since each lease is an individually negotiated contract between two or more parties, each lease will have different obligations of both the landlord and tenant. Many large national tenants have standard lease forms that generally do not vary from property to property. We have limited ability to revise the terms of leases to those tenants. Office space may be subject to “gross” leases. “Gross” leases means leases that typically require the tenant to pay a flat rental amount and we would pay for all property charges regularly incurred by our ownership or the office.
We anticipate that a majority of our future acquisitions will have lease terms of ten years or more at the time of the property acquisition. We have acquired and may continue to acquire properties under which the lease term has partially expired. We also may acquire properties with shorter lease terms if the property is in an attractive location, if the property is difficult to replace, or if the property has other significant favorable real estate attributes. Under most commercial leases, tenants are obligated to pay a predetermined annual base rent. Some of the leases also contain provisions that increase the amount of base rent payable at points during the lease term and/or that require the tenant to pay rent based upon a percentage of the tenant’s revenues. Percentage rent can be calculated based upon a number of factors. Under triple and double net leases, the tenants are generally required to pay the real estate taxes, insurance, utilities and common area maintenance charges associated with the properties. Generally, the leases require each tenant to procure, at its own expense, commercial general liability insurance, as well as property insurance covering the building for the full replacement value and naming the ownership entity and the lender, if applicable, as the additional insured on the policy. As a precautionary measure, we have obtained and may continue to obtain, to the extent available, secondary liability insurance, as well as loss of rents insurance that covers one year of annual rent in the event of a rental loss.  
We have purchased and may continue to purchase properties and lease them back to the sellers of such properties. While we use our best efforts to structure any such sale-leaseback transaction so that the lease will be characterized as a “true lease” and so that we are treated as the owner of the property for federal income tax purposes, the Internal Revenue Service (“IRS”) could challenge this characterization. In the event that any sale-leaseback transaction is re-characterized as a financing transaction for federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed.
Some leases require that we procure insurance for both commercial general liability and property damage; however, generally, the premiums are fully reimbursable from the tenant. In such instances, the policy will list us as the named insured and the tenant as the additional insured. Tenants are required to provide proof of insurance by furnishing a certificate of insurance to our advisor on an annual basis. The insurance certificates are tracked and reviewed for compliance by our advisor’s property and risk management departments.
In general, we do not permit leases to be assigned or subleased without our prior written consent. If we do consent to an assignment or sublease, generally the original tenant will remain fully liable under the lease unless we release that tenant from its obligations under the lease.
Real Estate Investment Decisions  
Our advisor has substantial discretion with respect to the selection of our specific investments, subject to our investment and borrowing policies, which are approved by our board of directors. In pursuing our investment objectives and making investment decisions on our behalf, our advisor evaluates the proposed terms of the investment against all aspects of the transaction, including the condition and financial performance of the asset, the terms of existing leases and the creditworthiness of the tenant, and property location and characteristics. Because the factors considered, including the specific weight we place on each factor, vary for each potential investment, we do not, and are not able to, assign a specific weight or level of importance to any particular factor. 

7

Our advisor procures and reviews an independent valuation estimate on the proposed investment. In addition, our advisor, to the extent such information is available, considers the following:
•
tenant rolls and tenant creditworthiness;
•
a property condition report;
•
unit level store performance;
•
property location, visibility and access;
•
age of the property, physical condition and curb appeal;
•
neighboring property uses;
•
local market conditions including vacancy rates;
•
area demographics, including trade area population and average household income;
•
neighborhood growth patterns and economic conditions;
•
presence of nearby properties that may positively or negatively impact store sales at the subject property; and
•
lease terms including length of lease term, scope of landlord responsibilities, presence and frequency of contractual rental increases, renewal option provisions, exclusive and permitted use provisions, co-tenancy requirements, tenant purchase options, termination options, projected net cash flow yield and projected internal rates of return.
Our advisor considers whether properties are leased by, or have leases guaranteed by, companies that maintain an investment grade rating by either Standard and Poor’s or Moody’s Investor Services. Our advisor also will consider non-rated and non-investment grade rated tenants that we consider creditworthy, as described in “—Real Estate Underwriting Process” above.
Conditions to Closing Our Real Estate Acquisitions  
Generally, we condition our obligation to close the purchase of any real estate investment on the delivery and verification of certain documents from the seller or developer, including, where appropriate: 
•
plans and specifications;
•
surveys;
•
evidence of marketable title, subject to such liens and encumbrances as are acceptable to CR III Advisors;
•
financial statements covering recent operations of properties having operating histories;
•
title and liability insurance policies; and
•
tenant estoppel certificates.
We generally will not purchase any property unless and until we also obtain what is generally referred to as a “Phase I” environmental site assessment and are generally satisfied with the environmental status of the property. However, we may purchase a property without obtaining such assessment if our advisor determines the assessment is not necessary under the circumstances. A Phase I environmental site assessment basically consists of a visual survey of the building and the property in an attempt to identify areas of potential environmental concerns, visually observing neighboring properties to assess surface conditions or activities that may have an adverse environmental impact on the property, and contacting local governmental agency personnel who perform a regulatory agency file search in an attempt to determine any known environmental concerns in the immediate vicinity of the property. A Phase I environmental site assessment does not generally include any sampling or testing of soil, ground water or building materials from the property and may not reveal all environmental hazards on a property.  

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We have and may continue to enter into purchase and sale arrangements with a seller or developer of a suitable property under development or construction. In such cases, we are obligated to purchase the property at the completion of construction, provided that the construction conforms to definitive plans, specifications, and costs approved by us in advance. In such cases, prior to our acquiring the property, we generally would receive a certificate of an architect, engineer or other appropriate party, stating that the property complies with all plans and specifications. If renovation or remodeling is required prior to the purchase of a property, we expect to pay a negotiated maximum amount to the seller upon completion. We do not currently intend to construct or develop properties or to render any services in connection with such development or construction but we may do so in the future.
In determining whether to purchase a particular property, we may, in accordance with customary practices, obtain an option on such property. The amount paid for an option, if any, normally is surrendered if the property is not purchased and normally is credited against the purchase price if the property is purchased.
In purchasing, leasing and developing properties, we will be subject to risks generally incident to the ownership of real estate. See Item 1A. “Risk Factors—General Risks Related to Investments in Real Estate.”
Ownership Structure  
Our investment in real estate generally takes the form of holding fee title or a long-term leasehold estate. We acquire such interests either directly through our operating partnership or indirectly through limited liability companies, limited partnerships or other entities owned and/or controlled by our operating partnership. We have acquired and may continue to acquire properties by acquiring the entity that holds the desired properties. We also have acquired and may continue to acquire properties through investments in joint ventures, partnerships, co-tenancies or other co-ownership arrangements with third parties, including the developers of the properties or affiliates of our advisor.
Joint Venture Investments
We may enter into joint ventures, partnerships, co-tenancies and other co-ownership arrangements with affiliated entities of our advisor, including other real estate programs sponsored by affiliates of our advisor, and other third parties for the acquisition, development or improvement of properties or the acquisition of other real estate-related investments. We have and may continue to also enter into such arrangements with real estate developers, owners and other unaffiliated third parties for the purpose of developing, owning and operating real properties. In determining whether to invest in a particular joint venture, our advisor evaluates the underlying real property or other real estate-related investment using the same criteria described above in “—Real Estate Investment Decisions” for the selection of our real property investments. Our advisor also evaluates the joint venture or co-ownership partner and the proposed terms of the joint venture or a co-ownership arrangement.  
Our general policy is to invest in joint ventures only when we will have a right of first refusal to purchase the co-venturer’s interest in the joint venture if the co-venturer elects to sell such interest. In the event that the co-venturer elects to sell all or a portion of the interests held in any such joint venture, however, we may not have sufficient funds to exercise our right of first refusal to buy the other co-venturer’s interest in the joint venture. In the event that any joint venture with an affiliated entity holds interests in more than one asset, the interest in each such asset may be specially allocated between us and the joint venture partner based upon the respective proportion of funds deemed invested by each co-venturer in each such asset.  
Our advisor’s officers and key persons may have conflicts of interest in determining which real estate program sponsored by Cole Real Estate Investments should enter into any particular joint venture agreement. The co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. In addition, our advisor’s officers and key persons may face a conflict in structuring the terms of the relationship between our interests and the interest of the affiliated co-venturer and in managing the joint venture. Since some or all of our advisor’s officers and key persons will also advise the affiliated co-venturer, agreements and transactions between us and any other real estate programs sponsored by Cole Real Estate Investments co-venturer will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers, which may result in the co-venturer receiving benefits greater than the benefits that we receive. In addition, we may assume liabilities related to the joint venture that exceed the percentage of our investment in the joint venture.
We may enter into joint ventures with other real estate programs sponsored by Cole Real Estate Investments, or with our sponsor, our advisor, one or more of our directors, or any of their respective affiliates, only if a majority of our directors (including a majority of our independent directors) not otherwise interested in the transaction approve the transaction as being fair and reasonable to us and on substantially the same terms and conditions as those received by unaffiliated joint venturers.

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Investing in and Originating Loans
Our criteria for making or investing in loans is substantially the same as those involved in our investment in properties. We do not intend to make loans to other persons, to underwrite securities of other issuers or to engage in the purchase and sale of any types of investments other than those relating to real estate. However, unlike our property investments which we expect to hold in excess of five years, we expect that the average duration of loans will typically be one to five years. We are not limited as to the amount of gross offering proceeds that we may apply to mortgage loan investments.
We do not expect to make or invest in loans that are not directly or indirectly secured by real estate. We will not make or invest in mortgage loans on any one property if the aggregate amount of all mortgage loans outstanding on the property, including our loan, would exceed an amount equal to 85% of the appraised value of the property, as determined by an independent third party appraiser, unless we find substantial justification due to other underwriting criteria. We may find such justification in connection with the purchase of loans in cases in which we believe there is a high probability of our foreclosure upon the property in order to acquire the underlying assets and in which the cost of the loan investment does not exceed the fair market value of the underlying property. We will not invest in or make loans unless an appraisal has been obtained concerning the underlying property, except for those loans insured or guaranteed by a government or government agency. In cases in which a majority of our independent directors so determine and in the event the transaction is with our advisor, any of our directors or their respective affiliates, the appraisal will be obtained from a certified independent appraiser to support its determination of fair market value.
We may invest in first, second and third mortgage loans, mezzanine loans, bridge loans, wraparound mortgage loans, construction mortgage loans on real property, and loans on leasehold interest mortgages. However, we will not make or invest in any loans that are subordinate to any mortgage or equity interest of our advisor or any of its or our affiliates. We also may invest in participations in mortgage loans. A mezzanine loan is a loan made in respect of certain real property but is secured by a lien on the ownership interests of the entity that, directly or indirectly, owns the real property. A bridge loan is short term financing, for an individual or business, until permanent or the next stage of financing, can be obtained. Second mortgage and wraparound loans are secured by second or wraparound deeds of trust on real property that is already subject to prior mortgage indebtedness. A wraparound loan is one or more junior mortgage loans having a principal amount equal to the outstanding balance under the existing mortgage loan, plus the amount actually to be advanced under the wraparound mortgage loan. Under a wraparound loan, we would generally make principal and interest payments on behalf of the borrower to the holders of the prior mortgage loans. Third mortgage loans are secured by third deeds of trust on real property that is already subject to prior first and second mortgage indebtedness. Construction loans are loans made for either original development or renovation of property. Construction loans in which we would generally consider an investment would be secured by first deeds of trust on real property for terms of six months to two years. Loans on leasehold interests are secured by an assignment of the borrower’s leasehold interest in the particular real property. These loans are generally for terms of from six months to 15 years. The leasehold interest loans are either amortized over a period that is shorter than the lease term or have a maturity date prior to the date the lease terminates. These loans would generally permit us to cure any default under the lease. Mortgage participation investments are investments in partial interests of mortgages of the type described above that are made and administered by third-party mortgage lenders.
In evaluating prospective loan investments, our advisor will consider factors such as the following:
•
the ratio of the investment amount to the underlying property’s value;
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the property’s potential for capital appreciation;
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expected levels of rental and occupancy rates;
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the condition and use of the property;
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current and projected cash flow of the property;
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potential for rent increases;
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the degree of liquidity of the investment;
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the property’s income-producing capacity;
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the quality, experience and creditworthiness of the borrower;
•
general economic conditions in the area where the property is located;

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•
in the case of mezzanine loans, the ability to acquire the underlying real property; and
•
other factors that our advisor believes are relevant.
In addition, we will seek to obtain a customary lender’s title insurance policy or commitment as to the priority of the mortgage or condition of the title. Because the factors considered, including the specific weight we place on each factor, will vary for each prospective loan investment, we do not, and are not able to, assign a specific weight or level of importance to any particular factor.
We may originate loans from mortgage brokers or personal solicitations of suitable borrowers, or may purchase existing loans that were originated by other lenders. Our advisor will evaluate all potential loan investments to determine if the security for the loan and the loan-to-value ratio meets our investment criteria and objectives. Most loans that we will consider for investment would provide for monthly payments of interest and some may also provide for principal amortization, although many loans of the nature that we will consider provide for payments of interest only and a payment of principal in full at the end of the loan term. We will not originate loans with negative amortization provisions.
We do not have any policies directing the portion of our assets that may be invested in construction loans, mezzanine loans, bridge loans, loans secured by leasehold interests and second, third and wraparound mortgage loans. However, we recognize that these types of loans are riskier than first deeds of trust or first priority on income-producing, fee-simple properties, and we expect to minimize the amount of these types of loans in our portfolio, to the extent that we make or invest in loans at all. Our advisor will evaluate the fact that these types of loans are riskier in determining the rate of interest on the loans. We do not have any policy that limits the amount that we may invest in any single loan or the amount we may invest in loans to any one borrower. We are not limited as to the amount of gross offering proceeds that we may use to invest in or originate loans.
Our loan investments may be subject to regulation by federal, state and local authorities and subject to various laws and judicial and administrative decisions imposing various requirements and restrictions, including among other things, regulating credit granting activities, establishing maximum interest rates and finance charges, requiring disclosures to customers, governing secured transactions and setting collection, repossession and claims handling procedures and other trade practices. In addition, certain states have enacted legislation requiring the licensing of mortgage bankers or other lenders and these requirements may affect our ability to effectuate our proposed investments in loans. Commencement of operations in these or other jurisdictions may be dependent upon a finding of our financial responsibility, character and fitness. We may determine not to make loans in any jurisdiction in which the regulatory authority determines that we have not complied in all material respects with applicable requirements.
Investment in Other Real Estate-Related Securities
If approved by a majority of directors (including a majority of independent directors) not otherwise interested in the transaction as fair, competitive and commercially reasonable, we may invest in common and preferred real estate-related equity securities of both publicly traded and private real estate companies. Our board of directors (including all of our independent directors) has authorized us to invest in preferred real estate-related equity securities, provided that such investments do not exceed the limitations contained in any credit facility or other agreement to which we are a party. Real estate-related equity securities are generally unsecured and also may be subordinated to other obligations of the issuer. Our investments in real estate-related equity securities will involve special risks relating to the particular issuer of the equity securities, including the financial condition and business outlook of the issuer. 
Also, we have and may continue to make investments in CMBS. CMBS are securities that evidence interests in, or are secured by, a single commercial mortgage loan or a pool of commercial mortgage loans. CMBS are generally pass-through certificates that represent beneficial ownership interests in common law trusts whose assets consist of defined portfolios of one or more commercial mortgage loans. They are typically issued in multiple tranches whereby the more senior classes are entitled to priority distributions from the trust’s income. Losses and other shortfalls from expected amounts to be received on the mortgage pool are borne by the most subordinate classes, which receive payments only after the more senior classes have received all principal and/or interest to which they are entitled. CMBS are subject to all of the risks of the underlying mortgage loans. We have and may continue to invest in investment grade and non-investment grade CMBS classes.

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Development and Construction of Properties
We have and may continue to invest in properties on which improvements are to be constructed or completed or which require substantial renovation or refurbishment, provided that we will not invest more than 10% of our total assets in unimproved properties or in mortgage loans secured by such properties. We will consider a property to be an unimproved property if it was not acquired for the purpose of producing rental or other operating cash flows, has no development or construction in process at the time of acquisition and no development or construction is planned to commence within one year of the acquisition.
To help ensure performance by the builders of properties that are under construction, completion of such properties will be guaranteed at the contracted price by a completion guaranty, completion bond or performance bond. Our advisor will enter into contracts on our behalf with contractors or developers for such construction services. If we contract with an affiliate of our advisor for such services, we will obtain the approval of a majority of our independent directors that the contract is fair and reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties. Our advisor may rely upon the substantial net worth of the contractor or developer or a personal guarantee accompanied by financial statements showing a substantial net worth provided by an affiliate of the person entering into the construction or development contract as an alternative to a completion bond or performance bond. Development of real estate properties is subject to risks relating to a builder’s ability to control construction costs or to build in conformity with plans, specifications and timetables. See Item 1A. “Risk Factors—General Risks Related to Investments in Real Estate.”
Additionally, we may engage our advisor or an affiliate of our advisor to provide development related services for all or some of the properties that we acquire for development or refurbishment. In those cases, we will pay our advisor or its affiliate a development fee that is usual and customary for comparable services rendered for similar projects in the geographic market where the services are provided if a majority of our independent directors determines that such development fees are fair and reasonable and on terms and conditions not less favorable than those available from unaffiliated third parties. However, we will not pay a development fee to our advisor or its affiliate if the advisor or any of its affiliates elects to receive an acquisition fee based on the cost of such development. In the event that our advisor assists with planning and coordinating the construction of any tenant improvements or capital improvements, our advisor may be paid up to 5% of the cost of such improvements.
We have and may continue to make periodic progress payments or other cash advances to developers and builders of our properties prior to completion of construction only upon receipt of an architect’s certification as to the percentage of the project then completed and as to the dollar amount of the construction then completed. We use such additional controls on disbursements to builders and developers as we deem necessary or prudent. We may directly employ one or more project managers, including our advisor or an affiliate of our advisor, to plan, supervise and implement the development of any unimproved properties that we may acquire. Such persons would be compensated directly by us or through an affiliate of our advisor and reimbursed by us. In either event, the compensation would reduce the amount of any construction fee, development fee or acquisition fee that we would otherwise pay to our advisor or its affiliate. 
Borrowing Policies  
Our advisor believes that utilizing borrowing is consistent with our investment objective of maximizing the return to investors. By operating on a leveraged basis, we have more funds available for investment in properties. This allows us to make more investments than would otherwise be possible, resulting in a more diversified portfolio.
There is no limitation on the amount we may borrow against any single improved property. However, pursuant to our charter, we are required to limit our aggregate borrowings to 75% of the cost (or 300% of net assets) (before deducting depreciation or other non-cash reserves) unless excess borrowing is approved by a majority of the independent directors and disclosed to our stockholders in the next quarterly report along with the justification for such excess borrowing. Our board of directors has adopted a policy to further limit our borrowings to 60% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our gross assets unless such borrowing is approved by a majority of the independent directors and disclosed to our stockholders in the next quarterly report along with a justification for such excess borrowing. As of December 31, 2012, we had a ratio of debt to total gross real estate and related assets net of gross intangible lease liabilities of 45%.  

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Our advisor uses its best efforts to obtain financing on the most favorable terms available to us. Our advisor has substantial discretion with respect to the financing we obtain, subject to our borrowing policies, which are approved by our board of directors. Lenders may have recourse to assets not securing the repayment of the indebtedness. Our advisor may refinance properties during the term of a loan only in limited circumstances, such as when a decline in interest rates makes it beneficial to prepay an existing mortgage, when an existing mortgage matures or if an attractive investment becomes available and the proceeds from the refinancing can be used to purchase such investment. The benefits of the refinancing may include increased cash flow resulting from reduced debt service requirements and an increase in property ownership if some refinancing proceeds are reinvested in real estate.
Our ability to increase our diversification through borrowing may be adversely impacted if banks and other lending institutions reduce the amount of funds available for loans secured by real estate. When interest rates on mortgage loans are high or financing is otherwise unavailable on a timely basis, we have purchased and may continue to purchase properties for cash with the intention of obtaining a mortgage loan for a portion of the purchase price at a later time. To the extent that we do not obtain mortgage loans on our properties, our ability to acquire additional properties will be restricted and we may not be able to adequately diversify our portfolio.  
Beginning in late 2007, domestic and international financial markets experienced significant disruptions that were brought about in large part by challenges in the world-wide banking system. These disruptions severely impacted the availability of credit and contributed to rising costs associated with obtaining credit. Since 2010, the volume of mortgage lending for commercial real estate has been increasing and lending terms have improved and they continue to improve; however, such lending activity continues to be significantly less than previous levels. Although lending market conditions have continued to improve, certain factors continue to negatively affect the lending environment, including the sovereign credit issues of certain countries in the European Union. We have experienced, and may continue to experience, more stringent lending criteria, which may affect our ability to finance certain property acquisitions or refinance our debt at maturity. Additionally, for properties for which we are able to obtain financing, the interest rates and other terms on such loans may be unacceptable. We have managed, and expect to continue to manage, the current mortgage lending environment by considering alternative lending sources, including the securitization of debt, utilizing fixed rate loans, borrowing on our existing credit facility (the “Credit Facility”), short-term variable rate loans, assuming existing mortgage loans in connection with property acquisitions, or entering into interest rate lock or swap agreements, or any combination of the foregoing.
We may not borrow money from any of our directors or from our advisor or its affiliates unless such loan is approved by a majority of the directors not otherwise interested in the transaction (including a majority of the independent directors) as fair, competitive and commercially reasonable and no less favorable to us than a comparable loan between unaffiliated parties. During the years ended December 31, 2012 and 2011, we did not acquire any properties or borrow any funds from affiliates of our advisor.
Disposition Policies
We intend to hold each property we acquire for an extended period of time, generally eight to ten years from the time of acquisition. Holding periods for other real estate-related investments will vary. However, circumstances might arise that could result in the early sale of some properties. We have sold, and may continue to sell, properties before the end of their expected holding period if we believe the sale of the property would be in the best interests of our stockholders. During the year ended December 31, 2012, we sold 28 properties for an aggregate gross sales price of $573.8 million and recorded a gain of $108.5 million. See Note 9 to our consolidated financial statements in this Annual Report on form 10-K for additional information on the sales.
The determination of whether a particular property should be sold or otherwise disposed of is made after consideration of relevant factors, including prevailing economic conditions and current tenant creditworthiness, with a view to achieving maximum capital appreciation. There can be no assurance that this objective will be realized. The selling price of a property that is net leased is determined in part by the amount of rent payable remaining under the lease and the economic conditions at that time. In connection with our sales of properties we may lend the purchaser all or a portion of the purchase price. In these instances, our taxable income may exceed the cash received in the sale. The terms of payment will be affected by customs in the area in which the property being sold is located and the then-prevailing economic conditions.

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Conflicts of Interest
We are subject to various conflicts of interest arising out of our relationship with CR III Advisors and its affiliates, including conflicts related to the arrangements pursuant to which we will compensate our advisor and its affiliates. While our independent directors will act on our behalf, our agreements and compensation arrangements with our advisor and its affiliates may not be determined by arm’s-length negotiations, since the approval process may be impacted by the fact that our stockholders invested with the understanding and expectation that an affiliate of Cole Real Estate Investments would act as our advisor. Some of the potential conflicts of interest in our transactions with our advisor and its affiliates, and certain conflict resolution procedures set forth in our charter, are described below. Although we cannot guarantee that the Merger will be consummated, we believe that the Merger would have the effect of reducing the conflicts of interest we currently experience as a result of being externally managed.
Our independent directors have an obligation to function on our behalf in all situations in which a conflict of interest may arise, and all of our directors have a fiduciary obligation to act on behalf of our stockholders.
Interests in Other Real Estate Programs and Other Concurrent Offerings
 Our officers and affiliates of our advisor endeavor to balance our interests with the interests of real estate programs sponsored by Cole Real Estate Investments to whom they owe duties. However, to the extent that these persons take actions that are more favorable to other entities than to us, these actions could have a negative impact on our financial performance and, consequently, on distributions to our stockholders and the value of our stock. In addition, our directors, officers and certain of our stockholders may engage for their own account in business activities of the types conducted or to be conducted by our subsidiaries and us.
Affiliates of our advisor act as an advisor to, and Christopher H. Cole, our chairman, president and chief executive officer, and D. Kirk McAllaster, Jr., our executive vice president, chief financial officer and treasurer, act as officers and/or directors of Cole Credit Property Trust, Inc. (“CCPT I”), Cole Credit Property Trust II, Inc. (“CCPT II”), Cole Corporate Income Trust, Inc. (“CCIT”), Cole Real Estate Income Strategy (Daily NAV), Inc. (“Cole Income NAV Strategy”) and/or Cole Credit Property Trust IV, Inc. (“CCPT IV”), REITs that have investment objectives and targeted assets similar to ours. In addition, Marc T. Nemer, one of our directors, also is a director of CCPT I, CCIT, Cole Income NAV Strategy and CCPT IV, one of our independent directors also is an independent director of CCIT, and another one of our independent directors also is an independent director of CCPT IV. CCPT I, CCPT II and CCPT IV focus primarily on the retail sector, CCIT is focused on the office and industrial sectors, and Cole Income NAV Strategy focuses on the retail, office and industrial sectors.
CCPT I and CCPT II are no longer offering shares for investment. CCPT I may seek to acquire additional properties using proceeds from the sale of one or more of its assets, which may be similar to properties in which we invest. On January 22, 2013, CCPT II entered into an Agreement and Plan of Merger with Spirit Reality Capital, Inc., a publicly listed REIT. The transaction is expected to close during the third quarter of 2013. CCIT commenced an initial public offering of up to $2.975 billion of shares of common stock in February 2011. Cole Income NAV Strategy commenced an initial public offering of up to $4.0 billion of shares of common stock in December 2011. CCPT IV commenced an initial public offering of up to $2.975 billion of shares of common stock in January 2012. CCPT IV is an active investor in real estate and real estate-related investments, and the investment objective and strategy of CCPT IV overlaps with our investment objective and strategy, thereby increasing the likelihood of potential acquisitions being appropriate for CCPT IV and for us. CCIT and Cole Income NAV Strategy also are active investors in real estate and real estate-related investments, and, although CCIT focuses primarily on the office and industrial sector, and Cole Income NAV Strategy focuses on commercial properties in the retail, office and industrial sectors, we anticipate that many investments that will be appropriate for investment by us also will be appropriate for investment by CCIT and Cole Income NAV Strategy.
Affiliates of our advisor, and entities owned or managed by such affiliates, also may acquire or develop real estate for their own accounts, and have done so in the past. Furthermore, affiliates of advisor, and entities owned or managed by such affiliates, intend to form additional real estate investment entities in the future, whether public or private, which can be expected to have the same or similar investment objectives and policies as we do and which may be involved in the same geographic area. Our advisor, its affiliates and affiliates of our directors and officers are not obligated to present to us any particular investment opportunity that comes to their attention, even if such opportunity is of a character that might be suitable for investment by us. Our advisor and its affiliates, as well as our officers and affiliated directors, likely will experience conflicts of interest as they simultaneously perform services for us and other real estate programs sponsored by Cole Real Estate Investments.

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Any real estate program sponsored by Cole Real Estate Investments, whether or not currently existing, could compete with us in the sale or operation of our assets. We will seek to achieve any operating efficiencies or similar savings that may result from affiliated management of competitive assets. However, to the extent such programs own or acquire property that is adjacent, or in close proximity, to a property we own, our property may compete with other program’s property for tenants or purchasers. 
Every transaction that we enter into with our advisor or its affiliates is subject to an inherent conflict of interest. Our board of directors may encounter conflicts of interest in enforcing our rights against our advisor or its affiliates in the event of a default by or disagreement with any of them or in invoking powers, rights or options pursuant to any agreement between us and our advisor, any of its affiliates or another real estate program sponsored by Cole Real Estate Investments.
Other Activities of CR III Advisors and its Affiliates
We rely on CR III Advisors for the day-to-day operation of our business. As a result of the interests of members of its management in other real estate programs sponsored by Cole Real Estate Investments and the fact that they also are engaged and will continue to engage in other business activities, CR III Advisors and its officers, key persons and respective affiliates have conflicts of interest in allocating their time between us and other real estate programs sponsored by Cole Real Estate Investments and other activities in which they are involved. However, CR III Advisors believes that it and its affiliates have sufficient personnel to discharge fully their responsibilities to all of the real estate programs sponsored by Cole Real Estate Investments and other ventures in which they are involved.
In addition, some of our executive officers also serve as an officer of our advisor, our property manager, our dealer manager and/or other affiliated entities. As a result, these individuals owe fiduciary duties to these other entities, as applicable, which may conflict with the fiduciary duties that he owes to us and our stockholders.
Transactions with Our Advisor and its Affiliates
Other than as set forth below, our board of directors has adopted a policy to prohibit acquisitions and loans from or to affiliates of our advisor. From time to time, our advisor may direct certain of its affiliates to acquire properties that would be suitable investments for us or our advisor may create special purpose entities to acquire properties that would be suitable investments for us. Subsequently, we may acquire such properties from such affiliates of our advisor but only at cost, including acquisition-related expenses. In addition, any and all acquisitions from affiliates of our advisor must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in such transaction as being fair and reasonable to us and at a price to us that is no greater than the cost of the property to the affiliate of our advisor. In no event will we acquire a property from an affiliate of our advisor if the cost to us would exceed the property’s current appraised value as determined by an independent appraiser.
From time to time, we may borrow funds from affiliates of our advisor, including our sponsor, as bridge financing to enable us to acquire a property when offering proceeds alone are insufficient to do so and third party financing has not been arranged. Any and all such transactions must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in such transaction as fair, competitive and commercially reasonable, and no less favorable to us than comparable loans between unaffiliated parties; provided, however, that our advisor or its affiliates has paid and may continue to pay costs on our behalf, pending our reimbursement, or we may defer payment of fees to our advisor or its affiliates, neither of which would be considered a loan. During the years ended December 31, 2012 and 2011, we did not purchase any properties or borrow any funds from affiliates of our advisor.
Potential Conflicts in Acquiring, Leasing and Reselling of Properties
There is a risk that a potential investment would be suitable for one or more real estate programs sponsored by Cole Real Estate Investments, in which case the officers of our advisor and its affiliates will have a conflict of interest allocating the investment opportunity to us or another program. There is a risk that our advisor will choose a property that provides lower returns to us than a property purchased by another real estate program sponsored by Cole Real Estate Investments. However, in such event, our advisor and the advisors to the other programs, with oversight by their respective boards of directors, will determine which program will be first presented with the opportunity. Additionally, our property manager may cause a prospective tenant to enter into a lease for property owned by another real estate program sponsored by Cole Real Estate Investments. In the event that these conflicts arise, our best interests may not be met when persons acting on our behalf and on behalf of other real estate programs sponsored by Cole Real Estate Investments decide whether to allocate any particular property to us or to another real estate program sponsored by Cole Real Estate Investments. 

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Conflicts of interest will exist to the extent that we may acquire, or seek to acquire, properties in the same geographic areas where properties owned by other real estate programs sponsored by Cole Real Estate Investments are located. In such a case, a conflict could arise in the acquisition or leasing of properties in the event that we and another real estate program sponsored by Cole Real Estate Investments were to compete for the same properties or tenants, or a conflict could arise in connection with the resale of properties in the event that we and another real estate program sponsored by Cole Real Estate Investments were to attempt to sell similar properties at the same time including in particular in the event another real estate program sponsored by Cole Real Estate Investments liquidates at approximately the same time as us. Conflicts of interest may also exist at such time as we or our affiliates managing property on our behalf seek to employ developers, contractors or building managers, as well as under other circumstances. Our advisor will seek to reduce conflicts relating to the employment of developers, contractors or building managers by making prospective employees aware of all such properties seeking to employ such persons. In addition, our advisor will seek to reduce conflicts that may arise with respect to properties available for sale or rent by making prospective purchasers or tenants aware of all such properties. However, these conflicts cannot be fully avoided in that there may be established differing compensation arrangements for employees at different properties or differing terms for re-sales or leasing of the various properties.
Potential Conflicts of Affiliated Property Manager
Currently, all of our properties are managed by our affiliated property manager, Cole Realty Advisors, Inc. (“Cole Realty”), pursuant to a property management and leasing agreement. Our agreement with Cole Realty has a one-year term, which may be renewed for an unlimited number of successive one-year terms upon the mutual consent of the parties. Cole Realty has and may continue to engage third parties to assist with certain property management functions under its supervision. Each such renewal shall be for a term of no more than one year. It is the duty of our board of directors to evaluate the performance of the property manager annually before renewing the agreement. Both Cole Realty and we may immediately terminate the agreement upon Cole Realty experiencing a bankruptcy, insolvency or liquidation event. Cole Realty also serves as property manager for properties owned by other real estate programs sponsored by Cole Real Estate Investments, some of which may be in competition with our properties. Management fees to be paid to our property manager are based on a percentage of the gross receipts received by the managed properties.
Receipt of Fees and Other Compensation by CR III Advisors and Its Affiliates
We have incurred, and expect to continue to incur, commissions, fees and expenses payable to CR III Advisors and affiliates in connection with the Offerings and the acquisition and management of our assets, including selling commissions, dealer manager fees, acquisition and advisory fees, financing coordination fees, property management and leasing fees, asset management fees, real estate commissions, organization and offering expenses, acquisition expenses and operating expenses. In connection with the sale of properties, we may pay CR III Advisors and affiliates real estate commissions and subordinated participation in net sale proceeds and subordinated performance fees.  However, the subordinated participation in net sale proceeds and the subordinated performance fees payable or reimbursable to CR III Advisors and its affiliates relating to the net sale proceeds from the sale of properties will only be payable after the return to the stockholders of their capital contributions plus cumulative returns on such capital. Subject to oversight by our board of directors, CR III Advisors will have considerable discretion with respect to all decisions relating to the terms and timing of all transactions. Therefore, CR III Advisors may have conflicts of interest concerning certain actions taken on our behalf, particularly due to the fact that such fees will generally be payable to CR III Advisors and its affiliates regardless of the quality of the properties acquired or the services provided to us.
Employees
We have no direct employees. The employees of CR III Advisors and other affiliates of our advisor provide services for us related to acquisition and disposition, property management, asset management, financing, accounting, investor relations, and administration. The employees of Cole Capital Corporation (“Cole Capital”), our dealer manager and an affiliate of our advisor, provided wholesale brokerage services.
We are dependent on our advisor and its affiliates for services that are essential to us, including the sale of shares of our common stock, asset acquisition decisions, property management and other general administrative responsibilities. In the event that these companies were unable to provide these services to us, we would be required to obtain such services from other sources. If the Merger is completed, we will have over 350 employees and will handle all of these functions for ourselves and for other Cole-sponsored entities.

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We reimburse CR III Advisors and its affiliates for expenses incurred in connection with its provision of administrative, acquisition, property management, asset management, financing, accounting, offering and investor relations services to us, including personnel costs, subject to certain limitations. During the years ended December 31, 2012, 2011 and 2010, $8.3 million, $6.8 million and $4.7 million, respectively, were incurred for the reimbursement of services provided by CR III Advisors and its affiliates in connection with the acquisition, management and financing of our assets. In addition, during the years ended December 31, 2012, 2011 and 2010, $13.2 million, $21.6 million and $14.0 million, respectively, was recorded for the reimbursement of personnel costs and third-party costs allocated in connection with the issuance of shares pursuant to the Offerings.
Insurance
See sections captioned “—Acquisition and Investment Policies—Description of Leases” and “—Environmental Matters.”
Reportable Segments
We operate on a consolidated basis in our commercial properties segment. See Note 3 to our consolidated financial statements in this Annual Report on Form 10-K.
Competition
As we purchase properties for our portfolio, we are in competition with other potential buyers for the same properties, and may have to pay more to purchase the property than if there were no other potential acquirers or we may have to locate another property that meets our investment criteria. Although our properties are currently 99% leased and we intend to acquire properties subject to existing leases, the leasing of real estate is highly competitive in the current market, and we may experience competition for tenants from owners and managers of competing projects. As a result, we may have to provide free rent, incur charges for tenant improvements, or offer other inducements, or we might not be able to timely lease the space, all of which may have an adverse impact on our results of operations. At the time we elect to dispose of our properties, we will also be in competition with sellers of similar properties to locate suitable purchasers for our properties.
Concentration of Credit Risk
As of December 31, 2012, we had cash on deposit, including restricted cash, in 12 financial institutions, eight of which had deposits in excess of current federally insured levels totaling $93.0 million; however, we have not experienced any losses in such accounts. We limit investment of cash investments to financial institutions with high credit standing; therefore, we believe we are not exposed to any significant credit risk on cash.
As of December 31, 2012, no single tenant accounted for greater than 10% of our 2012 gross annualized rental revenues. As of December 31, 2012, tenants in the restaurant industry comprised 10% of our 2012 gross annualized rental revenues. Additionally, we have certain geographic concentrations in our property holdings. In particular, as of December 31, 2012, 190 of our properties were located in Texas, accounting for 17% of our 2012 gross annualized rental revenues.
Environmental Matters
In connection with the ownership and operation of real estate, we potentially may be liable for costs and damages related to environmental matters. We own certain properties that are subject to environmental remediation. In each case, the seller of the property, the tenant of the property and/or another third party has been identified as the responsible party for environmental remediation costs related to the property. Additionally, in connection with the purchase of certain of the properties, the respective sellers and/or tenants have indemnified us against future remediation costs. We also carry environmental liability insurance on our properties which provides coverage for remediation liability and pollution liability for third-party bodily injury and property damage claims. Accordingly, we do not believe that it is reasonably possible that the environmental matters identified at such properties will have a material effect on our results of operations, financial condition or liquidity, nor are we aware of any environmental matters at other properties which we believe are reasonably possible to have a material effect on our results of operations, financial condition or liquidity. See “—Acquisition and Investment Policies—Conditions to Closing Our Acquisitions” for a description of the steps we may take to ensure environmental compliance in the properties we acquire.
Available Information
We electronically file our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports with the SEC. We have also filed Registration Statements on Form S-11, amendments to our Registration Statements and supplements to our prospectuses in connection with our Offerings. We have filed and we will file documents in connection with our Merger with the SEC. Copies of our filings with the SEC may be obtained from the SEC’s website, at http://www.sec.gov. Access to these filings is free of charge.

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ITEM 1A.     RISK FACTORS
Set forth below are investment risks that we believe are material to investors.
Risks Related to an Investment in Cole Credit Property Trust III, Inc. 
Failure to complete the Merger could negatively impact the value of our common stock and the future value of our business and financial results.
The Merger is subject to a number of closing conditions, including, among other things, certain third party consents and regulatory approvals. If the Merger is not completed, our ongoing business could be adversely affected and we will be subject to several risks, including being required, under certain circumstances, to pay up to $2.0 million in expense reimbursement. These risks could negatively impact the value of our common stock, the future value of our business and our financial results. In addition, whether or not the Merger is completed, we are subject to several risks, including the following:
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having to pay certain costs relating to the proposed Merger, such as legal, accounting and financial advisor fees; and
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diversion of management focus and resources from operational matters and other strategic opportunities while working to implement the Merger.
If we do not complete the Merger and a subsequent listing of our shares on the NYSE, there will continue to be no public trading market for our shares and there may never be one; therefore, your shares may continue to have limited liquidity.
There currently is no public market for our shares and, absent the completion of the proposed Merger and a subsequent listing of our shares on the NYSE, there may never be one. In addition, we do not have a fixed liquidation date. If the Merger and the subsequent listing of our shares on the NYSE are not completed, our stockholders will not have the opportunity to sell their shares and our board of directors will review other alternatives for a liquidity event, which may not occur in the near term. If the Merger does not occur and/or our shares are not listed on the NYSE, and you seek to sell your shares, you may not sell your shares unless the buyer meets applicable suitability and minimum purchase standards. Our charter also currently prohibits the ownership of more than 9.8% of our stock, or more than 9.8% in value or number of shares (whichever is more restrictive) of our common stock, by a single investor, unless exempted by our board of directors, which may inhibit large investors from desiring to purchase your shares. If we do not complete the Merger and the subsequent listing of our shares on the NYSE, you may have to hold your shares for an indefinite period of time or, if you are able to sell your shares, you likely would have to sell them at a substantial discount to the price you paid for the shares.
If a proposed amendment and restatement of our charter is not approved by our stockholders, we may not seek to list our shares on the NYSE and your shares may continue to have limited liquidity.
We believe that an amendment and restatement of our charter is desirable in connection with a listing of our common stock on the NYSE. The holders of a majority of the outstanding shares of our common stock are required to approve an amendment and restatement of our charter. If the proposed amendment and restatement of our charter is not approved by our stockholders, we currently do not intend to list our common stock on the NYSE, although we are not prohibited from deciding to list our common stock. If we were to decide to list our common stock without the amendment and restatement of our charter, we believe that operating under our existing charter as a listed company could restrict our ability to compete effectively for investment opportunities and management talent and to attract and retain independent directors. If we do not list our shares on a national securities exchange, you may have to hold your shares for an indefinite period of time or, if you are able to sell your shares, you likely would have to sell them at a substantial discount to the price you paid for the shares.
You are limited in your ability to sell your shares pursuant to our share redemption program and may have to hold your shares for an indefinite period of time.
Our share redemption program includes numerous restrictions that would limit your ability to sell your shares. Generally, you must have held your shares for one year in order to participate in our share redemption program. Subject to funds being available, we will further limit the number of shares redeemed pursuant to our share redemption program as follows: (1) we will not redeem in excess of 5% of the weighted average number of shares outstanding during the trailing twelve months prior to the end of the fiscal quarter for which the redemptions are being paid (the “Trailing Twelve-month Cap”) (provided, however, that while shares subject to a redemption requested upon the death of a stockholder will be included in calculating the maximum number of shares that may be redeemed, such shares will not be subject to the Trailing Twelve-month Cap); (2) all redemptions, including those upon the death or qualifying disability, are limited to those that can be funded with cumulative net proceeds from the sale of shares through our DRIP; and (3) funding for the redemption of shares will be limited to the net proceeds we receive from the sale of shares under our distribution reinvestment plan. In an effort to accommodate redemption

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requests throughout the calendar year, we limit quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing twelve-month period ending on the last day of the fiscal quarter, and funding for redemptions for each quarter generally is limited to the net proceeds we receive from the sale of shares in the respective quarter under our DRIP (provided, however, that while shares subject to a redemption requested upon the death of a stockholder will be included in calculating the maximum number of shares that may be redeemed, such shares will not be subject to the quarterly percentage caps); however, our board of directors may waive these quarterly limitations in its sole discretion. Any of the foregoing limits might prevent us from accommodating all redemption requests made in any quarter, in which case quarterly redemptions will be made in the manner described under Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Share Redemption Program” appearing elsewhere in this Annual Report on Form 10-K. Our board of directors may amend the terms of, suspend, or terminate our share redemption program without stockholder approval upon 30 days prior written notice. Additionally, our share redemption program will terminate automatically upon a listing, in connection with the Merger or otherwise, of our common stock on a national securities exchange. These restrictions severely limit your ability to sell your shares should you require liquidity, and limit your ability to recover the value you invested or the fair market value of your shares.
Litigation against us could distract our management and/or negatively impact our operating results.
As noted below in Item 3. “Legal Proceedings”, we, along with our operating partnership, advisor and directors, have been named as defendants in complaints seeking monetary damages and seeking to have the Merger Agreement declared null and void.  Additional claims may be filed against us in connection with the proposed Merger. Although it is not possible to predict the outcome of litigation with any certainty, claims of this nature present a risk of protracted litigation, attorneys’ fees, costs and expenses, and diversion of management’s attention from the operation of our business.
The offering price for our DRIP shares is not based on the book value or net asset value of our current or expected investments or our current or expected cash flow.
The offering price for our DRIP shares is not based on the book value or net asset value of our current or expected investments or our current or expected cash flow. In the event that our shares are not listed on a national securities exchange prior to October 27, 2013 (which is 18 months following the completion of our Follow-On Offering), our board of directors intends to provide a reasonable estimate of the value of our shares prior to October 27, 2013 (which is 18 months following the completion of our Follow-On Offering). In such event, until such time as our board of directors determines a reasonable estimate of the value of our shares, the price of our shares is not intended to reflect the net asset value of our shares.
The value of your investment may be diluted if the offering price for our shares of common stock is less than the value of the DRIP shares.
Since the offering price for our shares is not based on the book value or net asset value of our current or expected investments or our current or expected operating cash flows, the value of your DRIP shares may, after you purchase them, be diluted if the offering price paid by future investors is lower than their fair value. It may be difficult for you to determine the fair value of our shares; therefore, the total dilution, if any, may be difficult for you to determine.
We may be unable to pay or maintain cash distributions or increase distributions over time.
There are many factors that can affect the availability and timing of cash distributions to our stockholders. Distributions are based primarily on anticipated cash flow from operations over time. The amount of cash available for distributions is affected by many factors, such as the performance of our advisor in selecting investments for us to make, selecting tenants for our properties and securing financing arrangements, our ability to buy properties as offering proceeds become available, rental income from our properties, and our operating expense levels, as well as many other variables. We may not always be in a position to pay distributions to you and any distributions we do make may not increase over time. In addition, our actual results may differ significantly from the assumptions used by our board of directors in establishing the distribution rate to our stockholders. There also is a risk that we may not have sufficient cash from operations to make a distribution required to maintain our REIT status. 

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We have paid, and may continue to pay some of our distributions from sources other than cash flow from operations, including borrowings and proceeds from the sale of our securities or asset sales. Payments of distributions from sources other than cash flows from operations may reduce the amount of capital we ultimately invest in real estate and may negatively impact the value of your investment.
We expect that cash distributions to you generally will be paid from cash available or anticipated from the operating cash flows from our investments in properties, real estate securities, mortgage, bridge or mezzanine loans and other real estate-related assets. However, to the extent that cash flow from operations is insufficient to make distributions to you, we have paid, and in the future may pay, some of our distributions from sources other than cash flows from operations, including borrowings and proceeds from the sale of our securities or asset sales. We have no limits on the amounts we may pay from sources other than cash flows from operations. To the extent distributions are paid from sources other than cash flow from operations, we may have less capital available to invest in real estate and other real estate-related investments. This may negatively impact our ability to make investments, reduce current returns and negatively impact the value of your investment.
Because we have paid, and may continue to pay, distributions from sources other than our cash flow from operations, distributions at any point in time may not reflect the current performance of our properties or our current operating cash flows.
Our organizational documents permit us to make distributions from any source, including the sources described in the risk factor above. Because distribution funds may exceed our cash flow from operations, distributions may not reflect the current performance of our properties or our current operating cash flows. To the extent distributions exceed cash flow from operations, distributions may be treated as a return of your investment and could reduce your basis in our stock. A reduction in a stockholder’s basis in our stock could result in the stockholder recognizing more gain upon disposition of his or her shares, which in turn could result in greater taxable income to such stockholder. In addition, as of December 31, 2012, we had paid distributions in excess of our cash flow from operations, as defined by accounting principles generally accepted in the United States of America (“GAAP”), and we may continue to pay distributions in excess of our cash flow from operations in the future. 
You will not have the opportunity to evaluate our future investments before we make them, which makes an investment in our common stock more speculative.
We have established policies relating to the types of investments we will make and the creditworthiness of tenants of our properties, but our advisor will have wide discretion in implementing these policies, subject to the oversight of our board of directors. Additionally, our advisor has discretion to determine the location, number and size of our investments and the percentage of net proceeds we may dedicate to a single investment. We will not provide you with a significant amount of information, if any, for you to evaluate our future investments prior to our making them. 
Our success depends to a significant degree upon certain key personnel of our advisor. If our advisor loses or is unable to obtain key personnel our ability to achieve our investment objectives could be delayed or hindered, which could adversely affect our ability to pay distributions to you and the value of your investment. 
Our success depends to a significant degree upon the contributions of certain executive officers and other key personnel of our advisor, each of whom would be difficult to replace. We cannot guarantee that all of these key personnel, or any particular person, will remain affiliated with us, our sponsor and/or our advisor. If any of our key personnel were to cease their affiliation with our advisor, our operating results could suffer. Further, we currently do not separately maintain key person life insurance on Mr. Cole or any other person and we may not do so in the future. We believe that our future success depends, in large part, upon our advisor’s ability to hire and retain highly skilled managerial, operational and marketing personnel. Competition for such personnel is intense, and we cannot assure you that our sponsor or advisor will be successful in attracting and retaining such skilled personnel. If our advisor loses or is unable to obtain the services of key personnel, our ability to implement our investment strategies could be delayed or hindered, and the value of your investment may decline.

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Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our tenant and investor relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those we have outsourced. We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results, operations, business relationships or confidential information will not be negatively impacted by such an incident.
Risks Related to Conflicts of Interest
We will continue to be subject to conflicts of interest arising out of our relationships with our advisor and its affiliates, including the material conflicts discussed below.
Our advisor and its affiliates, including our dealer manager and our property manager, will face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.
Our advisor and its affiliates, including our dealer manager and our property manager, are responsible for all of our day-to-day operations, and are entitled to substantial fees from us for the services they provide. These fees could influence the judgment of our advisor and its affiliates in performing their services. Among other matters, these compensation arrangements could affect their judgment with respect to:
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public offerings of equity by us, which entitle our dealer manager to fees and will likely entitle our advisor to increased acquisition and asset management fees;
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property acquisitions or sales, which may result in the payment of fees to our advisor;
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property acquisitions from other real estate programs sponsored by Cole Real Estate Investments, which might entitle affiliates of our advisor to real estate commissions and possible success-based sale fees in connection with its services for the seller;
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borrowings to acquire properties, which borrowings will increase the acquisition and asset management fees payable to our advisor; and
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whether and when we seek to sell our company, liquidate our assets or list our common stock on a national securities exchange, which liquidation or listing could entitle our advisor to the payment of fees.
In addition, fees our advisor receives in connection with transactions involving the purchase and management of an asset are based on the cost or book value of the investment and not on the quality of the investment, the future performance of the investment or the quality of the services rendered to us.
Our advisor faces conflicts of interest relating to the incentive fee structure under our advisory agreement, which could result in actions that are not necessarily in the long-term best interests of our stockholders.
Pursuant to the terms of our advisory agreement, and in an effort to align the interests of our advisor with our stockholders’ interest, our advisor is entitled to fees that are structured in a manner intended to provide incentives to our advisor to perform in a manner that will enhance returns on our stockholders’ investment in us. However, because our advisor does not maintain a significant equity interest in us and is entitled to receive certain fees regardless of performance, our advisor’s interests are not wholly aligned with those of our stockholders. For example, our advisor could be motivated to recommend riskier or more speculative investments in order for us to generate the specified levels of performance or sales proceeds that would entitle our advisor to fees. In addition, our advisory agreement requires us to pay a performance-based termination fee to our advisor in the event that we list our shares for trading on an exchange or in respect of its participation in net sales proceeds. Our advisor will have substantial influence with respect to whether and when our shares are listed on an exchange or our assets are

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liquidated, and these incentive fees could influence our advisor’s recommendations to us in this regard. Furthermore, our advisor has the right to terminate the advisory agreement upon a change of control of our company and thereby obligate us to pay the performance fee, which could have the effect of delaying, deferring or preventing the change of control.
A number of Cole real estate programs use investment strategies that are similar to ours, therefore our advisor and its and our executive officers may face conflicts of interest relating to the purchase and leasing of properties, and such conflicts may not be resolved in our favor.
Our sponsor currently has simultaneous offerings of funds that have a substantially similar mix of fund characteristics, including targeted investment types, investment objectives and criteria, and anticipated fund terms. As a result, we may be seeking to acquire properties and other real estate-related investments at the same time as one or more of the other real estate programs sponsored by Cole Real Estate Investments managed by officers and key personnel of our advisor and/or its affiliates. In particular, CCIT, CCPT IV and Cole Income NAV Strategy are currently offering shares of common stock pursuant to effective registration statements and pursuing acquisitions of assets that may be suitable for us to acquire. Our executive officers and the executive officers of our advisor also are the executive officers of other REITs sponsored by Cole Real Estate Investments and/or their advisors, the general partners of partnerships sponsored by Cole Real Estate Investments and/or the advisors or fiduciaries of other real estate programs sponsored by Cole Real Estate Investments. While the real estate programs sponsored by Cole Real Estate Investments have allocation procedures in place, there is a risk that our advisor’s allocation of investment properties may result in our acquiring a property that provides lower returns to us than a property purchased by another real estate programs sponsored by Cole Real Estate Investments. In addition, we may compete with another real estate program sponsored by Cole Real Estate Investments for tenants and, as a result, we could suffer a loss of revenue due to delays in locating suitable tenants. Similar conflicts of interest may arise if our advisor recommends that we make or purchase mortgage loans or participations in mortgage loans, since other real estate programs sponsored by Cole Real Estate Investments may be competing with us for these investments.
Our officers face conflicts of interest related to the positions they hold with affiliated entities, which could hinder our ability to successfully implement our business strategy and to generate returns to you.
Each of our executive officers, including Mr. Cole, who also serves as the chairman of our board of directors, is an officer of other real estate programs sponsored by Cole Real Estate Investments and one or more of the entities affiliated with our advisor. As a result, these individuals owe fiduciary duties to these other entities and their stockholders, members and limited partners. These additional fiduciary duties may create conflicts with the duties that they owe to us and our stockholders. There also will be competing demands on their time and resources, creating potential conflicts of interest in allocating their time between our business and these other activities. Should such persons devote insufficient time or resources to our business, it would hinder our ability to successfully implement our business strategy and to generate returns to you.
Our charter permits us to acquire assets and borrow funds from affiliates of our advisor, which could result in conflicts of interest.
Under our charter, we are permitted to acquire properties from affiliates of our advisor, subject to certain limitations and procedures. In the event that we acquire a property from an affiliate of our advisor, we may be foregoing an opportunity to acquire a different property that might be more advantageous to us. In addition, under our charter, we are permitted to borrow funds from affiliates of our advisor, including our sponsor. To the extent that we acquire any properties from affiliates of our advisor or borrow funds from affiliates of our advisor, we may not have the benefit of an arm’s-length negotiation of the type normally conducted between unrelated parties, and such transactions could result in a conflict of interest.
Our advisor faces conflicts of interest relating to joint ventures or other co-ownership arrangements that we enter into with other real estate programs sponsored by Cole Real Estate Investments, which could result in a disproportionate benefit to another real estate program sponsored by Cole Real Estate Investments.
We may enter into joint ventures with other real estate programs sponsored by Cole Real Estate Investments for the acquisition, development or improvement of properties as well as the acquisition of real-estate related investments. Our advisor and its affiliates may face conflicts of interest in determining which real estate program sponsored by Cole Real Estate Investments should enter into any particular joint venture or co-ownership arrangement. Our advisor and its affiliates also may have a conflict in structuring the terms of the relationship between us and the Cole-affiliated co-venturer or co-owner, as well as conflicts of interests in managing the joint venture and determining when and how to dispose of the joint venture.

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Since Mr. Cole and his affiliates control our advisor and advisors of other real estate programs sponsored by Cole Real Estate Investments, agreements and transactions between or among the parties with respect to any joint venture or other co-ownership arrangement will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers or co-owners, which may result in the co-venturer or co-owner receiving benefits greater than the benefits that we receive. We have adopted certain procedures for dealing with potential conflicts of interest as set forth in our charter.
Risks Related to Our Corporate Structure 
The limit on the number of shares a person may own may discourage a takeover that could otherwise result in a premium price to our stockholders.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. Unless exempted by our board of directors, no person may own more than 9.8% in value of the aggregate of our outstanding shares or more than 9.8% (in value or number of shares, whichever is more restrictive) of the aggregate of our outstanding shares of common stock. These restrictions may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium to the purchase price of our common stock for our stockholders.
Our charter permits our board of directors to issue stock with terms that may subordinate the rights of common stockholders or discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders.
Our charter permits our board of directors to issue up to 1.0 billion shares of stock, including 10.0 million shares of preferred stock. In addition, our board of directors, without any action by our stockholders, may amend our charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series of stock that we have authority to issue. Our board of directors may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption of any such stock. Thus, if also approved by a majority of our independent directors not otherwise interested in the transaction, who will have access at our expense to our legal counsel or to independent legal counsel, our board of directors could authorize the issuance of preferred stock with terms and conditions that could have a priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Preferred stock could also have the effect of delaying, deferring or preventing the removal of incumbent management or a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium to the purchase price of our common stock for our stockholders.
Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may limit your ability to dispose of your shares in the event we do not ultimately list our shares on the NYSE.
Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:
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any person who beneficially owns 10% or more of the voting power of the corporation’s shares; or
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an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting stock of the corporation.
A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which he or she otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board of directors.
After the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:
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80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and
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two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

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These super-majority vote requirements do not apply if the corporation’s stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. The business combination statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our board of directors has exempted any business combination involving our advisor or any affiliate of our advisor. Consequently, the five-year prohibition and the super-majority vote requirements will not apply to business combinations between us and our advisor or any affiliate of our advisor. As a result, our advisor and any affiliate of our advisor may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance with the super-majority vote requirements and the other provisions of the statute. The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.
Maryland law also limits the ability of a third party to buy a large percentage of our outstanding shares and exercise voting control in electing directors.
Under its Control Share Acquisition Act, Maryland law also provides that “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights except to the extent approved by the corporation’s disinterested stockholders by a vote of two-thirds of the votes entitled to be cast on the matter. Shares of stock owned by interested stockholders, that is, by the acquirer, or officers of the corporation or employees of the corporation who are directors of the corporation, are excluded from shares entitled to vote on the matter. “Control shares” are voting shares of stock that would entitle the acquirer, except solely by virtue of a revocable proxy, to exercise voting control in electing directors within specified ranges of voting control. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of control shares. The control share acquisition statute does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation. Our bylaws contain a provision exempting from the Control Share Acquisition Act any and all acquisitions of our stock by Cole Capital Advisors or any affiliate of Cole Capital Advisors. This statute could have the effect of discouraging offers from third parties to acquire us and increasing the difficulty of successfully completing this type of offer by anyone other than our advisor or any of its affiliates.
Our charter includes an anti-takeover provision that may discourage a stockholder from launching a tender offer for our shares.
Our charter requires that any tender offer, including any “mini-tender” offer, must comply with Regulation 14D of the Exchange Act. The offering person must provide our company notice of the tender offer at least ten business days before initiating the tender offer. If the offering person does not comply with these requirements, we will have the right to redeem that person’s shares and any shares acquired in such tender offer. In addition, the non-complying person shall be responsible for all of our expenses in connection with that person’s noncompliance. This provision of our charter may discourage a person from initiating a tender offer for our shares and prevent you from receiving a premium to your purchase price for your shares in such a transaction.
If we are required to register as an investment company under the Investment Company Act of 1940, as amended, we could not continue our business, which may significantly reduce the value of your investment.
We are not registered as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), pursuant to an exemption in Section 3(c)(5)(C) of the Investment Company Act and certain No-Action Letters from the SEC. Pursuant to this exemption: (1) at least 55% of our assets must consist of real estate fee interests or loans secured exclusively by real estate or both; (2) at least 25% of our assets must consist of loans secured primarily by real estate (this percentage will be reduced by the amount by which the percentage in (1) above is increased); and (3) up to 20% of our assets may consist of miscellaneous investments. We intend to monitor compliance with these requirements on an ongoing basis. If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act imposing, among other things:
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limitations on capital structure;
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restrictions on specified investments;
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prohibitions on transactions with affiliates;
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compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations; and

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•
potentially, compliance with daily valuation requirements.
In order to maintain our exemption from regulation under the Investment Company Act, we must engage primarily in the business of buying real estate, and these investments must be made within a year after the offering ends. If we are unable to invest a significant portion of the proceeds of the Offerings in properties within one year of the termination of the respective offering, we may avoid being required to register as an investment company by temporarily investing any unused proceeds in government securities with low returns. This would reduce the cash available for distribution to investors and possibly lower your returns.
To maintain compliance with the Investment Company Act exemption, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have to acquire additional income or loss generating assets that we might not otherwise have acquired or may have to forgo opportunities to acquire interests in companies that we would otherwise want to acquire and would be important to our investment strategy. If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court were to require enforcement, and a court could appoint a receiver to take control of us and liquidate our business.
If you do not agree with the decisions of our board of directors, you only have limited control over changes in our policies and operations and may not be able to change such policies and operations. 
Our board of directors determines our major policies, including our policies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under the Maryland General Corporation Law and our charter, our stockholders generally have a right to vote only on the following:
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the election or removal of directors;
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any amendment of our charter, except that our board of directors may amend our charter without stockholder approval to increase or decrease the aggregate number of our shares, to increase or decrease the number of our shares of any class or series that we have the authority to issue, to change our name, to change the name or other designation or the par value of any class or series of our stock and the aggregate par value of our stock or to effect certain reverse stock splits; provided, however, that any such amendment does not adversely affect the rights, preferences and privileges of the stockholders;
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our dissolution; and
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a merger or consolidation of the sale or other disposition of all or substantially all of our assets.
All other matters are subject to the discretion of our board of directors.
Our board of directors may change certain of our investment policies without stockholder approval, which could alter the nature of your investment.
Our charter requires that our independent directors review our investment policies at least annually to determine that the policies we are following are in the best interest of the stockholders. These policies may change over time. The methods of implementing our investment policies also may vary, as new real estate development trends emerge and new investment techniques are developed. Our investment policies, the methods for their implementation, and our other objectives, policies and procedures may be altered by our board of directors without the approval of our stockholders, unless otherwise provided in our organizational documents. As a result, the nature of your investment could change without your consent.
Our rights and the rights of our stockholders to recover claims against our officers, directors and our advisor are limited, which could reduce your and our recovery against them if they cause us to incur losses.
Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter, in the case of our directors and officers, and our charter and the advisory agreement, in the case of our advisor and its affiliates, require us, subject to certain exceptions, to indemnify and advance expenses to our directors, our officers, and our advisor and its affiliates. Our charter permits us to provide such indemnification and advance for expenses to our employees and agents. Additionally, our charter limits, subject to certain exceptions, the liability of our directors and officers to us and our stockholders for monetary damages. Although our charter does not allow us to indemnify our directors or our advisor and its affiliates for any liability or loss suffered by them or hold harmless our directors or our advisor and its affiliates for any loss or liability suffered by us to a greater extent than

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permitted under Maryland law or the Statement of Policy Regarding Real Estate Investment Trusts adopted by the North American Securities Administrators Association (the “NASAA REIT Guidelines”), we and our stockholders may have more limited rights against our directors, officers, employees and agents, and our advisor and its affiliates, than might otherwise exist under common law, which could reduce our recovery against them. In addition, our advisor is not required to retain cash to pay potential liabilities and it may not have sufficient cash available to pay liabilities if they arise. If our advisor is held liable for a breach of its fiduciary duty to us, or a breach of its contractual obligations to us, we may not be able to collect the full amount of any claims we may have against our advisor. We may be obligated to fund the defense costs incurred by our directors, officers, employees and agents or our advisor in some cases, which would decrease the cash otherwise available for distribution to our stockholders. 
General Risks Related to Investments in Real Estate
Our operating results will be affected by economic and regulatory changes that have an adverse impact on the real estate market in general, which may prevent us from being profitable or from realizing growth in the value of our real estate properties.
Our operating results are subject to risks generally incident to the ownership of real estate, including:
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changes in general economic or local conditions;
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changes in supply of or demand for similar or competing properties in an area;
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changes in interest rates and availability of permanent mortgage funds that may render the sale of a property difficult or unattractive;
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the illiquidity of real estate investments generally;
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changes in tax, real estate, environmental and zoning laws; and
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periods of high interest rates and tight money supply.
These risk and other factors may prevent us from being profitable, or from maintaining or growing the value of our real estate properties. 
Many of our retail properties depend upon a single tenant, or a limited number of major tenants, for all or a majority of its rental income; therefore, our financial condition and ability to make distributions to you may be adversely affected by the bankruptcy or insolvency, a downturn in the business, or a lease termination of a single tenant.
Many of our properties are occupied by only one tenant or derive a majority of its rental income from a limited number of major tenants and, therefore, the success of those properties is materially dependent on the financial stability of such tenants. Such tenants face competition within their industries and other factors that could reduce their ability to make rent payments. For example, for our industrial properties, a general reduction in U.S. manufacturing activity could reduce our manufacturing tenants’ ability to pay rent. Lease payment defaults by tenants could cause us to reduce the amount of distributions we pay. A default of a tenant on its lease payments to us would cause us to lose revenue from the property and force us to find an alternative source of revenue to meet any expenses associated with the property and prevent a foreclosure if the property is subject to a mortgage. In the event of a default by a single or major tenant, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-letting the property. If a lease is terminated, we may not be able to lease the property for the rent previously received or sell the property without incurring a loss. A default by a tenant, the failure of a guarantor to fulfill its obligations or other premature termination of a lease, or a tenant’s election not to extend a lease upon its expiration, could have an adverse effect on our financial condition and our ability to pay distributions to you. 
A high concentration of our properties in a particular geographic area, or with tenants in a similar industry, would magnify the effects of downturns in that geographic area or industry.
We expect that our properties will continue to be diverse according to geographic area and industry of our tenants. However, in the event that we have a concentration of properties in any particular geographic area, any adverse situation that disproportionately affects that geographic area would have a magnified adverse effect on our portfolio. Similarly, if tenants of our properties become concentrated in a certain industry or industries, any adverse effect to that industry generally would have a disproportionately adverse effect on our portfolio.

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If a major tenant declares bankruptcy, we may be unable to collect balances due under relevant leases, which could have a material adverse effect on our financial condition and ability to pay distributions to you.
We may experience concentration in one or more tenant. Any of our tenants, or any guarantor of one of our tenant’s lease obligations, could be subject to a bankruptcy proceeding pursuant to Title 11 of the bankruptcy laws of the United States. Such a bankruptcy filing would bar us from attempting to collect pre-bankruptcy debts from the bankrupt tenant or its properties unless we receive an enabling order from the bankruptcy court. Post-bankruptcy debts would be paid currently. If we assume a lease, all pre-bankruptcy balances owing under it must be paid in full. If a lease is rejected by a tenant in bankruptcy, we would have a general unsecured claim for damages. If a lease is rejected, it is unlikely we would receive any payments from the tenant because our claim would be capped at the rent reserved under the lease, without acceleration, for the greater of one year or 15% of the remaining term of the lease, but not greater than three years, plus rent already due but unpaid. This claim could be paid only in the event funds were available, and then only in the same percentage as that realized on other unsecured claims.
The bankruptcy of a tenant or lease guarantor could delay our efforts to collect past due balances under the relevant lease, and could ultimately preclude full collection of these sums. Such an event also could cause a decrease or cessation of current rental payments, reducing our operating cash flows and the amount available for distributions to you. In the event a tenant or lease guarantor declares bankruptcy, the tenant or its trustee may not assume our lease or its guaranty. If a given lease or guaranty is not assumed, our operating cash flows and the amounts available for distributions to you may be adversely affected. The bankruptcy of a major tenant could have a material adverse effect on our ability to pay distributions to you.
If a sale-leaseback transaction is re-characterized in a tenant’s bankruptcy proceeding, our financial condition could be adversely affected.
We have entered and may continue to enter into sale-leaseback transactions, whereby we would purchase a property and then lease the same property back to the person from whom we purchased it. In the event of the bankruptcy of a tenant, a transaction structured as a sale-leaseback may be re-characterized as either a financing or a joint venture, either of which outcomes could adversely affect our financial condition, cash flow and the amount available for distributions to you.
If the sale-leaseback were re-characterized as a financing, we might not be considered the owner of the property, and as a result would have the status of a creditor in relation to the tenant. In that event, we would no longer have the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the tenant for the amounts owed under the lease, with the claim arguably secured by the property. The tenant/debtor might have the ability to propose a plan restructuring the term, interest rate and amortization schedule of its outstanding balance. If confirmed by the bankruptcy court, we could be bound by the new terms, and prevented from foreclosing our lien on the property. If the sale-leaseback were re-characterized as a joint venture, our lessee and we could be treated as co-venturers with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property.
Properties that have vacancies for a significant period of time could be difficult to sell, which could diminish the return on your investment. 
A property may incur vacancies either by the continued default of a tenant under its leases, the expiration of a tenant lease or early termination of a lease by a tenant. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in less cash to be distributed to you. In addition, because a property’s market value depends principally upon the value of the property’s leases, the resale value of a property with prolonged vacancies could decline, which could further reduce your return. 
We may be unable to secure funds for future tenant improvements or capital needs, which could adversely impact our ability to pay cash distributions to you.
When tenants do not renew their leases or otherwise vacate their space, it is usual that, in order to attract replacement tenants, we will be required to expend substantial funds for tenant improvements and tenant refurbishments to the vacated space. In addition, although we expect that our leases with tenants will require tenants to pay routine property maintenance costs, we will likely be responsible for any major structural repairs, such as repairs to the foundation, exterior walls and rooftops. We will use substantially all of the gross proceeds from the Offerings to buy real estate and real estate-related investments and to pay various fees and expenses. We intend to reserve only approximately 0.1% of the gross proceeds from the Offerings for future capital needs. Accordingly, if we need additional capital in the future to improve or maintain our properties or for any other reason, we will have to obtain funds from other sources, such as cash flow from operations, borrowings, property sales or future equity offerings. These sources of funding may not be available on attractive terms or at all. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flows or decline in value, or both.

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We may obtain only limited warranties when we purchase a property and would have only limited recourse in the event our due diligence did not identify any issues that lower the value of our property.
The seller of a property often sells such property in its “as is” condition on a “where is” basis and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase agreements may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing. The purchase of properties with limited warranties increases the risk that we may lose some or all of our invested capital in the property, as well as the loss of rental income from that property.
Our inability to sell a property when we desire to do so could adversely impact our ability to pay cash distributions to you.
The real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates, supply and demand, and other factors that are beyond our control. We cannot predict whether we will be able to sell any property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We may be required to expend funds to correct defects or to make improvements before a property can be sold. We may not have adequate funds available to correct such defects or to make such improvements. Moreover, in acquiring a property, we may agree to restrictions that prohibit the sale of that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. Our inability to sell a property when we desire to do so may cause us to reduce our selling price for the property. Any delay in our receipt of proceeds, or diminishment of proceeds, from the sale of a property could adversely impact our ability to pay distributions to you.
We may not be able to sell our properties at a price equal to, or greater than, the price for which we purchased such property, which may lead to a decrease in the value of our assets.
Many of our leases will not contain rental increases over time. When that is the case, the value of the leased property to a potential purchaser may not increase over time, which may restrict our ability to sell that property, or if we are able to sell that property, may result in a sale price less than the price that we paid to purchase the property.
We may acquire or finance properties with lock-out provisions, which may prohibit us from selling a property, or may require us to maintain specified debt levels for a period of years on some properties.
A lock-out provision is a provision that prohibits the prepayment of a loan during a specified period of time. Lock-out provisions may include terms that provide strong financial disincentives for borrowers to prepay their outstanding loan balance and exist in order to protect the yield expectations of investors. We expect that many of our properties will be subject to lock-out provisions. Lock-out provisions could materially restrict us from selling or otherwise disposing of or refinancing properties when we may desire to do so. Lock-out provisions may prohibit us from reducing the outstanding indebtedness with respect to any properties, refinancing such indebtedness on a non-recourse basis at maturity, or increasing the amount of indebtedness with respect to such properties. Lock-out provisions could impair our ability to take other actions during the lock-out period that could be in the best interests of our stockholders and, therefore, may have an adverse impact on the value of our shares relative to the value that would result if the lock-out provisions did not exist. In particular, lock-out provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control even though that disposition or change in control might be in the best interests of our stockholders.
Increased operating expenses could reduce cash flow from operations and funds available to acquire investments or make distributions.
Our properties, including those that we acquire in the future, are and will be subject to operating risks common to real estate in general, any or all of which may negatively affect us. If any property is not fully occupied or if rents are being paid in an amount that is insufficient to cover operating expenses, we could be required to expend funds with respect to that property for operating expenses. The properties will be subject to increases in tax rates, utility costs, insurance costs, repairs and maintenance costs, administrative costs and other operating expenses. While many of our property leases require the tenants to pay all or a portion of these expenses, some of our leases or future leases may not be negotiated on that basis, in which event we may have to pay these costs. If we are unable to lease properties on terms that require the tenants to pay all or some of the properties’ operating expenses, if our tenants fail to pay these expenses as required or if expenses we are required to pay exceed our expectations, we could have less funds available for future acquisitions or cash available for distributions to you.

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Adverse economic and geopolitical conditions may negatively affect our returns and profitability.
Our operating results may be affected by market and economic challenges, which may result from a continued or exacerbated general economic downturn experienced by the nation as a whole, by the local economies where our properties may be located, or by the real estate industry including the following:
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poor economic conditions may result in tenant defaults under leases;
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poor economic conditions may result in lower revenue to us from retailers who pay us a percentage of their revenues under percentage rent leases;
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re-leasing may require concessions or reduced rental rates under the new leases;
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constricted access to credit may result in tenant defaults or non-renewals under leases; and
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increased insurance premiums may reduce funds available for distribution or, to the extent such increases are passed through to tenants, may lead to tenant defaults. Increased insurance premiums may make it difficult to increase rents to tenants on turnover, which may adversely affect our ability to increase our returns.
The length and severity of any economic slowdown or downturn cannot be predicted. Our operations could be negatively affected to the extent that an economic slowdown or downturn is prolonged or becomes more severe. 
The United States’ armed conflict in various parts of the world could have a further impact on our tenants. The consequences of any armed conflict are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business or your investment. More generally, any of these events could result in increased volatility in or damage to the United States and worldwide financial markets and economy. They also could result in higher energy costs and increased economic uncertainty in the United States or abroad. Our revenues will be dependent upon payment of rent by retailers, which may be particularly vulnerable to uncertainty in the local economy. Adverse economic conditions could affect the ability of our tenants to pay rent, which could have a material adverse effect on our operating results and financial condition, as well as our ability to pay distributions to you.
The current market environment may adversely affect our operating results, financial condition and ability to pay distributions to our stockholders.
The global financial markets have undergone pervasive and fundamental disruptions since mid-2007. The disruptions in the global financial markets had an adverse impact on the availability of credit to businesses generally. To the extent that the global economic recession continues and/or intensifies, it has the potential to materially adversely affect the value of our properties and other investments we make, the availability or the terms of financing that we may anticipate utilizing, and our ability to make principal and interest payments on, or refinance, any outstanding debt when due, and/or, for our leased properties, the ability of our tenants to enter into new leasing transactions or satisfy rental payments under existing leases. If the current market environment was to persist or worsen or the global disruptions were to adversely affect the recovery of U.S. financial markets it could affect our operating results and financial condition as follows:
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Debt Market - Since 2010, the volume of mortgage lending for commercial real estate has been increasing and lending terms have improved and continue to improve; however the real estate debt markets could begin experiencing increasing volatility as a result of certain factors, including the tightening of underwriting standards by lenders and credit rating agencies. Should overall borrowing costs increase, either by increases in the index rates or by increases in lender spreads, our operations may generate lower returns. In addition, dislocations in the debt markets could reduce the amount of capital that is available to finance real estate, which, in turn: (1) limits the ability of real estate investors to make new acquisitions and to potentially benefit from reduced real estate values or to realize enhanced returns on real estate investments; (2) could slow real estate transaction activity; and (3) may result in an inability to refinance debt as it becomes due. In addition, deterioration in the state of the debt markets could have a material adverse impact on the overall amount of capital being invested in real estate, which may result in price or value decreases of real estate assets and impact our ability to raise equity capital. In addition, the failure of any lending source with which we entered, or enter, into a credit facility or line of credit would adversely affect our ability to meet our obligations if we were unable to replace the funding source.

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Real Estate Market - The global economic recession caused commercial real estate values to decline substantially. The U.S. commercial real estate markets began a recovery in 2010 which has continued through 2012. However, if the global recession were to persist or worsen, or it were to affect the U.S. financial markets, there may be uncertainty in the valuation, or in the stability of the value, of the properties we own or may acquire that could result in a substantial decrease in the value of our properties. Consequently, we may not be able to recover the carrying amount of our properties, which may require us to recognize an impairment charge in earnings.
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Government Intervention - The disruptions in the global financial markets have led to extensive and unprecedented government intervention. Although the government intervention is intended to stimulate the flow of capital and to strengthen the U.S. economy in the short term, it is impossible to predict the actual effect of the government intervention and what effect, if any, additional interim or permanent governmental intervention may have on the financial markets and/or the effect of such intervention on us.
The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments.
We diversify our cash and cash equivalents, and will continue to do so, among several banking institutions in an attempt to minimize exposure to any one of these entities. However, the Federal Deposit Insurance Corporation only insures amounts up to $250,000 per depositor per insured bank for interest bearing accounts. We have cash and cash equivalents and restricted cash deposited in interest bearing accounts in certain financial institutions in excess of federally insured levels. If any of the banking institutions in which we have deposited funds ultimately fails, we may lose our deposits over $250,000. The loss of our deposits could reduce the amount of cash we have available to distribute or invest and could result in a decline in the value of your investment.
If we suffer losses that are not covered by insurance or that are in excess of insurance coverage, we could lose invested capital and anticipated profits.
Generally, each of our tenants is, and we expect, will be, responsible for insuring its goods and premises and, in some circumstances, may be required to reimburse us for a share of the cost of acquiring comprehensive insurance for the property, including casualty, liability, fire and extended coverage customarily obtained for similar properties in amounts that our advisor determines are sufficient to cover reasonably foreseeable losses. Tenants of single-user properties leased on a triple net basis typically are required to pay all insurance costs associated with those properties. Material losses may occur in excess of insurance proceeds with respect to any property, as insurance may not be sufficient to fund the losses. However, there are types of losses, generally of a catastrophic nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, which are either uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential terrorist acts could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases insist that commercial property owners purchase specific coverage against acts of terrorism as a condition for providing mortgage loans. It is uncertain whether such insurance policies will be available at reasonable cost, or at all, which could inhibit our ability to finance or refinance our potential properties. In these instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate, or any, coverage for such losses. The Terrorism Risk Insurance Act of 2002 is designed for a sharing of terrorism losses between insurance companies and the federal government. We cannot be certain how this act will impact us or what additional cost to us, if any, could result. If such an event damaged or destroyed one or more of our properties, we could lose both our invested capital and anticipated profits from such property.
Real estate related taxes may increase, and if these increases are not passed on to tenants, our income will be reduced.
Local real property tax assessors may reassess our properties, which may result in increased taxes. Generally, property taxes increase as property values or assessment rates change, or for other reasons deemed relevant by property tax assessors. An increase in the assessed valuation of a property for real estate tax purposes will result in an increase in the related real estate taxes on that property. Although some tenant leases may permit us to pass through such tax increases to the tenants for payment, renewal leases or future leases may not be negotiated on the same basis. Tax increases not passed through to tenants may adversely affect our income, cash available for distributions, and the amount of distributions to you.

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CC&Rs may restrict our ability to operate a property.
Some of our properties are, and we expect certain additional properties will be contiguous to other parcels of real property, comprising part of the same retail center. In connection with such properties, we are subject to significant covenants, conditions and restrictions, known as “CC&Rs,” restricting the operation of such properties and any improvements on such properties, and related to granting easements on such properties. Moreover, the operation and management of the contiguous properties may impact such properties. Compliance with CC&Rs may adversely affect our operating costs and reduce the amount of funds that we have available to pay distributions to you.
Our operating results may be negatively affected by potential development and construction delays and resultant increased costs and risks.
We have used, and may continue to use, proceeds from the Offerings to acquire properties upon which we will construct improvements. If we engage in development or construction projects, we will be subject to uncertainties associated with re-zoning for development, environmental concerns of governmental entities and/or community groups, and our builder’s ability to build in conformity with plans, specifications, budgeted costs, and timetables. If a builder fails to perform, we may resort to legal action to rescind the purchase or the construction contract or to compel performance. A builder’s performance may also be affected or delayed by conditions beyond the builder’s control. Delays in completion of construction could also give tenants the right to terminate preconstruction leases. We may incur additional risks if we make periodic progress payments or other advances to builders before they complete construction. These and other such factors can result in increased costs of a project or loss of our investment. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. We also must rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a price at the time we acquire the property. If our projections are inaccurate, we may pay too much for a property, and our return on our investment could suffer. 
While we do not currently intend to do so, we may invest in unimproved real property. Returns from development of unimproved properties are also subject to risks associated with re-zoning the land for development and environmental concerns of governmental entities and/or community groups.
If we contract with a development company for newly developed property, our earnest money deposit made to the development company may not be fully refunded. 
We have and may continue to enter into one or more contracts, either directly or indirectly through joint ventures with third parties, and we may enter into such contracts with other real estate programs sponsored by Cole Real Estate Investments, to acquire real property from a development company that is engaged in construction and development of commercial real properties. Properties acquired from a development company may be either existing income-producing properties, properties to be developed or properties under development. We anticipate that we will be obligated to pay a substantial earnest money deposit at the time of contracting to acquire such properties. In the case of properties to be developed by a development company, we anticipate that we will be required to close the purchase of the property upon completion of the development of the property. At the time of contracting and the payment of the earnest money deposit by us, the development company typically will not have acquired title to any real property. Typically, the development company will only have a contract to acquire land, a development agreement to develop a building on the land and an agreement with one or more tenants to lease all or part of the property upon its completion. We may enter into such a contract with the development company even if at the time we enter into the contract, we have not yet raised sufficient proceeds in our offering to enable us to close the purchase of such property. However, we may not be required to close a purchase from the development company, and may be entitled to a refund of our earnest money, in the following circumstances:
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the development company fails to develop the property;
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all or a specified portion of the pre-leased tenants fail to take possession under their leases for any reason; or
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we are unable to raise sufficient proceeds from our offering to pay the purchase price at closing.
The obligation of the development company to refund our earnest money will be unsecured, and we may not be able to obtain a refund of such earnest money deposit from it under these circumstances since the development company may be an entity without substantial assets or operations.

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Competition with third parties in acquiring properties and other investments may reduce our profitability and the return on your investment.
We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, other REITs, real estate limited partnerships, and other entities engaged in real estate investment activities, many of which have greater resources than we do. Larger competitors may enjoy significant advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investments may increase. Any such increase would result in increased demand for these assets and therefore increased prices paid for them. If we pay higher prices for properties and other investments as a result of competition with third parties without a corresponding increase in tenant lease rates, our profitability will be reduced, and you may experience a lower return on your investment.
Our properties face competition that may affect tenants’ ability to pay rent and the amount of rent paid to us may affect the cash available for distributions to you and the amount of distributions.
We typically acquire properties located in developed areas. Therefore, there are and will be numerous other retail properties within the market area of each of our properties that will compete with us for tenants. The number of competitive properties could have a material effect on our ability to rent space at our properties and the amount of rents charged. We could be adversely affected if additional competitive properties are built in close proximity to our properties, causing increased competition for customer traffic and creditworthy tenants. This could result in decreased cash flow from tenants and may require us to make capital improvements to properties that we would not have otherwise made, thus affecting cash available for distributions to you and the amount of distributions we pay. 
Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations. 
From time to time, we acquire multiple properties in a single transaction. Portfolio acquisitions are more complex and expensive than single property acquisitions, and the risk that a multiple-property acquisition does not close may be greater than in a single-property acquisition. Portfolio acquisitions may also result in us owning investments in geographically dispersed markets, placing additional demands on our ability to manage the properties in the portfolio. In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio. In these situations, if we are unable to identify another person or entity to acquire the unwanted properties, we may be required to operate or attempt to dispose of these properties. To acquire multiple properties in a single transaction we may be required to accumulate a large amount of cash. We would expect the returns that we earn on such cash to be less than the ultimate returns on real property, therefore accumulating such cash could reduce our funds available for distributions to you. Any of the foregoing events may have an adverse effect on our operations. 
If we set aside insufficient capital reserves, we may be required to defer necessary capital improvements. 
If we do not have enough reserves for capital to supply needed funds for capital improvements throughout the life of the investment in a property and there is insufficient cash flow from operations, we may be required to defer necessary improvements to a property, which may cause that property to suffer from a greater risk of obsolescence or a decline in value, or a greater risk of decreased operating cash flows as a result of fewer potential tenants being attracted to the property. If this happens, we may not be able to maintain projected rental rates for affected properties, and our results of operations may be negatively impacted.
Costs of complying with environmental laws and regulations may adversely affect our income and the cash available for any distributions.
All real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid hazardous materials, and the remediation of contamination associated with disposals. Some of these laws and regulations may impose joint and several liability on tenants, owners or operators for the costs of investigation or remediation of contaminated properties, regardless of fault or whether the acts causing the contamination were legal. This liability could be substantial. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell or rent such property or to use such property as collateral for future borrowing. 

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Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require material expenditures by us. Future laws, ordinances or regulations may impose material environmental liability. Additionally, our properties may be affected by our tenants’ operations, the existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties. In addition, there are various local, state and federal fire, health, life-safety and similar regulations that we may be required to comply with, and that may subject us to liability in the form of fines or damages for noncompliance. Any material expenditures, fines, or damages we must pay will reduce our ability to make distributions to you and may reduce the value of your investment. 
We may not obtain an independent third-party environmental assessment for every property we acquire. In addition, any such assessment that we do obtain may not reveal all environmental liabilities. The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims would materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution to you. 
Discovery of previously undetected environmentally hazardous conditions may adversely affect our operating results. 
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the cost of removal or remediation of hazardous or toxic substances on, under or in such property. The costs of removal or remediation could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures. Environmental laws provide for sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous substances, including asbestos-containing materials into the air, and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution to you. 
If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our cash flow from operations.
If we decide to sell any of our properties, we intend to use our best efforts to sell them for cash. However, in some instances we may sell our properties by providing financing to purchasers. When we provide financing to purchasers, we will bear the risk that the purchaser may default on its obligations under the financing, which could negatively impact cash flow from operations. Even in the absence of a purchaser default, the distribution of sale proceeds, or their reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon the sale are actually paid, sold, refinanced or otherwise disposed of. In some cases, we may receive initial down payments in cash and other property in the year of sale in an amount less than the selling price, and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing arrangement with us, it could negatively impact our ability to pay cash distributions to you. 
Our costs associated with complying with the Americans with Disabilities Act of 1990, as amended, may affect cash available for distributions. 
Our properties generally are subject to the Americans with Disabilities Act of 1990, as amended (the “Disabilities Act”). Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The Disabilities Act could require us to remove access barriers and could result in the imposition of injunctive relief, monetary penalties, or, in some cases, an award of damages. We will attempt to acquire properties that comply with the Disabilities Act or place the burden on the seller or other third party, such as a tenant, to ensure compliance with the Disabilities Act. However, we may not be able to acquire properties or allocate responsibilities in this manner. If we cannot, our funds used for the Disabilities Act compliance may affect cash available for distributions and the amount of distributions to you.

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A proposed change in U.S. accounting standards for leases could reduce the overall demand to lease our properties.
The existing accounting standards for leases require lessees to classify their leases as either capital or operating leases. Under a capital lease, both the leased asset, which represents the tenant’s right to use the property, and the contractual lease obligation are recorded on the tenant’s balance sheet if one of the following criteria are met: (1) the lease transfers ownership of the property to the lessee by the end of the lease term; (2) the lease contains a bargain purchase option; (3) the non-cancelable lease term is more than 75% of the useful life of the asset; or (4) if the present value of the minimum lease payments equals 90% or more of the leased property’s fair value. If the terms of the lease do not meet these criteria, the lease is considered an operating lease, and no leased asset or contractual lease obligation is recorded by the tenant.
Recently, the U.S. Financial Accounting Standards Board (the “FASB”) and the International Accounting Standards Board (“IASB”) initiated a joint project to develop new guidelines to lease accounting. The FASB and IASB (collectively, the “Boards”) recently issued Exposure Drafts (the “Exposure Drafts”), which propose substantial changes to the current lease accounting standards, primarily by eliminating the concept of operating lease accounting. As a result, a lease asset and obligation would be recorded on the tenant’s balance sheet for all lease arrangements. In addition, the Exposure Drafts could impact the method in which contractual lease payments would be recorded. In order to mitigate the effect of the proposed lease accounting, tenants may seek to negotiate certain terms within new lease arrangements or modify terms in existing lease arrangements, such as shorter lease terms, which would generally have less impact on tenant balance sheets. Also, tenants may reassess their lease-versus-buy strategies. This could result in a greater renewal risk, a delay in investing proceeds from our Offerings, or shorter lease terms, all of which may negatively impact our operations and our ability to pay distributions to you.
The Exposure Drafts do not include a proposed effective date, are still being deliberated, and are subject to change. The Boards intend to complete their deliberations and publish a revised exposure draft during the first half of 2013; however, a final standard is not expected to be issued until 2013 or 2014.
Risks Associated with Debt Financing
We have incurred mortgage indebtedness and other borrowings, which may increase our business risks, hinder our ability to make distributions, and decrease the value of your investment. 
We have acquired real estate and other real estate-related investments by borrowing new funds. In addition, we may incur mortgage debt and pledge all or some of our real properties as security for that debt to obtain funds to acquire additional real properties and other investments and to pay distributions to stockholders. We may borrow additional funds if we need funds to satisfy the REIT tax qualification requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders. We may also borrow additional funds if we otherwise deem it necessary or advisable to assure that we maintain our qualification as a REIT for federal income tax purposes. 
Our advisor believes that utilizing borrowing is consistent with our investment objective of maximizing the return to investors. There is no limitation on the amount we may borrow against any individual property or other investment. However, under our charter, we are required to limit our borrowings to 75% of the cost (before deducting depreciation or other non-cash reserves) of our gross assets, unless excess borrowing is approved by a majority of the independent directors and disclosed to our stockholders in our next quarterly report along with a justification for such excess borrowing. Moreover, our board of directors has adopted a policy to further limit our borrowings to 60% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our gross assets, unless such borrowing is approved by a majority of the independent directors and disclosed to our stockholders in the next quarterly report along with a justification for such excess borrowing. Our borrowings will not exceed 300% of our net assets as of the date of any borrowing, which is the maximum level of indebtedness permitted under the NASAA REIT Guidelines; however, we may exceed that limit if approved by a majority of our independent directors. We expect that during the period of the Offerings, high debt levels would cause us to incur higher interest charges, would result in higher debt service payments, and could be accompanied by restrictive covenants. These factors could limit the amount of cash we have available to distribute to you and could result in a decline in the value of your investment. 
We do not intend to incur mortgage debt on a particular property unless we believe the property’s projected operating cash flow is sufficient to service the mortgage debt. However, if there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on a property, the amount available for distributions to you may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of your investment. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds from the foreclosure. In such event, we may be unable to pay the amount of distributions

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required in order to maintain our REIT status. We have given, and in the future may give full or partial guarantees to lenders of mortgage debt to the entities that own our properties. When we provide a guaranty on behalf of an entity that owns one of our properties, we are responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to you will be adversely affected, which could result in our losing our REIT status and would result in a decrease in the value of your investment. 
High interest rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire and the amount of cash distributions we can make to you. 
We run the risk of being unable to finance or refinance our properties on favorable terms or at all. If interest rates are higher when we desire to mortgage our properties or when existing loans come due and the properties need to be refinanced, we may not be able to finance the properties and we would be required to use cash to purchase or repay outstanding obligations. Our inability to use debt to finance or refinance our properties could reduce the number of properties we can acquire, which could reduce our operating cash flows and the amount of cash distributions we can make to you. Higher costs of capital also could negatively impact operating cash flows and returns on our investments. 
Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to pay distributions to you. 
We have incurred, and in the future may incur additional indebtedness that bears interest at a variable rate. To the extent that we incur variable rate debt, increases in interest rates would increase our interest costs, which could reduce our operating cash flows and our ability to pay distributions to you. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times that may not permit realization of the maximum return on such investments. 
Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to you. 
In connection with providing us financing, a lender could impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. In general, our loan agreements restrict our ability to encumber or otherwise transfer our interest in the respective property without the prior consent of the lender. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property, discontinue insurance coverage or replace CR III Advisors as our advisor. These or other limitations imposed by a lender may adversely affect our flexibility and our ability to achieve our investment and operating objectives, which could limit our ability to make distributions to you. 
Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to you. 
We have financed our property acquisitions using interest-only mortgage indebtedness and may continue to do so. During the interest-only period, the amount of each scheduled payment will be less than that of a traditional amortizing mortgage loan. The principal balance of the mortgage loan will not be reduced (except in the case of prepayments) because there are no scheduled monthly payments of principal during this period. After the interest-only period, we will be required either to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity. These required principal or balloon payments will increase the amount of our scheduled payments and may increase our risk of default under the related mortgage loan. If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments also may increase at a time of rising interest rates. Increased payments and substantial principal or balloon maturity payments will reduce the funds available for distribution to our stockholders because cash otherwise available for distribution will be required to pay principal and interest associated with these mortgage loans. 
Our ability to make a balloon payment at maturity is uncertain and may depend upon our ability to obtain additional financing or our ability to sell the property. At the time the balloon payment is due, we may or may not be able to refinance the loan on terms as favorable as the original loan or sell the property at a price sufficient to make the balloon payment. The effect of a refinancing or sale could affect the rate of return to stockholders and the projected time of disposition of our assets. In addition, payments of principal and interest made to service our debts may leave us with insufficient cash to pay the distributions that we are required to pay to maintain our qualification as a REIT. Any of these results would have a significant, negative impact on your investment. 

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To hedge against exchange rate and interest rate fluctuations, we may use derivative financial instruments that may be costly and ineffective and may reduce the overall returns on your investment. 
We have entered into, and in the future may use additional derivative financial instruments to hedge our exposure to changes in exchange rates and interest rates on loans secured by our assets and investments in CMBS. Derivative instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. Our actual hedging decisions will be determined in light of the facts and circumstances existing at the time of the hedge and may differ from time to time. 
To the extent that we use derivative financial instruments to hedge against exchange rate and interest rate fluctuations, we will be exposed to credit risk, basis risk and legal enforceability risks. In this context, credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. Basis risk occurs when the index upon which the contract is based is more or less variable than the index upon which the hedged asset or liability is based, thereby making the hedge less effective. Finally, legal enforceability risks encompass general contractual risks, including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract. If we are unable to manage these risks effectively, our results of operations, financial condition and ability to pay distributions to you will be adversely affected.
Risks Associated with Investments in Mortgage, Bridge and Mezzanine Loans and Real Estate-Related Securities 
Investing in mortgage, bridge or mezzanine loans could adversely affect our return on our loan investments. 
We may make or acquire mortgage, bridge or mezzanine loans, or participations in such loans, to the extent our advisor and board of directors determine that it is advantageous for us to do so. However, if we make or invest in mortgage, bridge or mezzanine loans, we will be at risk of defaults on those loans caused by many conditions beyond our control, including local and other economic conditions affecting real estate values, interest rate changes, rezoning, and failure by the borrower to maintain the property. If there are defaults under these loans, we may not be able to repossess and sell quickly any properties securing such loans. An action to foreclose on a property securing a loan is regulated by state statutes and regulations and is subject to many of the delays and expenses of any lawsuit brought in connection with the foreclosure if the defendant raises defenses or counterclaims. In the event of default by a mortgagor, these restrictions, among other things, may impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the loan, which could reduce the value of our investment in the defaulted loan. In addition, investments in mezzanine loans involve a higher degree of risk than long-term senior mortgage loans secured by income-producing real property because the investment may become unsecured as a result of foreclosure on the underlying real property by the senior lender. 
We have invested in, and may continue to invest in, various types of real estate-related securities. 
Aside from investments in real estate, we are permitted to invest in real estate-related securities, including securities issued by other real estate companies, CMBS, mortgage, bridge, mezzanine or other loans and Section 1031 tenant-in-common interests, and we may invest in real estate-related securities of both publicly traded and private real estate companies. We are focused, however, on acquiring interests in retail and other income-producing properties. We may not have the expertise necessary to maximize the return on our investment in real estate-related securities. If our advisor determines that it is advantageous to us to make the types of investments in which our advisor or its affiliates do not have experience, our advisor intends to employ persons, engage consultants or partner with third parties that have, in our advisor’s opinion, the relevant expertise necessary to assist our advisor in evaluating, making and administering such investments. 
Investments in real estate-related securities will be subject to specific risks relating to the particular issuer of the securities and may be subject to the general risks of investing in subordinated real estate securities, which may result in losses to us. 
Our investments in real estate-related securities will involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer. Issuers of real estate-related equity securities generally invest in real estate or real estate-related assets and are subject to the inherent risks associated with real estate-related investments discussed herein, including risks relating to rising interest rates. 
Real estate-related securities are often unsecured and also may be subordinated to other obligations of the issuer. As a result, investments in real estate-related securities are subject to risks of (1) limited liquidity in the secondary trading market in the case of unlisted or thinly traded securities, (2) substantial market price volatility resulting from changes in prevailing interest rates in the case of traded equity securities, (3) subordination to the prior claims of banks and other senior lenders to the issuer, (4) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to reinvest redemption proceeds in lower yielding assets, (5) the possibility that earnings of the issuer may be insufficient to meet its debt service and distribution obligations and (6) the declining creditworthiness and potential for

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insolvency of the issuer during periods of rising interest rates and economic slowdown or downturn. These risks may adversely affect the value of outstanding real estate-related securities and the ability of the issuers thereof to repay principal and interest or make distribution payments.
The CMBS in which we have invested, and may continue to invest, are subject to all of the risks of the underlying mortgage loans, the risks of the securitization process and dislocations in the mortgage-backed securities market in general. 
CMBS are securities that evidence interests in, or are secured by, a single commercial mortgage loan or a pool of commercial mortgage loans. Accordingly, these securities are subject to all of the risks of the underlying mortgage loans. In a rising interest rate environment, the value of CMBS may be adversely affected when payments on underlying mortgages do not occur as anticipated, resulting in the extension of the security’s effective maturity and the related increase in interest rate sensitivity of a longer-term instrument. The value of CMBS may also change due to shifts in the market’s perception of issuers and regulatory or tax changes adversely affecting the mortgage securities market as a whole. In addition, CMBS are subject to the credit risk associated with the performance of the underlying mortgage properties. CMBS are issued by investment banks, not financial institutions, and are not insured or guaranteed by the U.S. government. 
CMBS are also subject to several risks created through the securitization process. Subordinate CMBS are paid interest only to the extent that there are funds available to make payments. To the extent the collateral pool includes delinquent loans, there is a risk that interest payments on subordinate CMBS will not be fully paid. Subordinate CMBS are also subject to greater credit risk than those CMBS that are more highly rated. In certain instances, third-party guarantees or other forms of credit support can reduce the credit risk. 
Although we intend to invest only in mortgage-backed securities collateralized by commercial loans, the value of such CMBS can be negatively impacted by any dislocation in the mortgage-backed securities market in general. Currently, the mortgage-backed securities market is suffering from a severe dislocation created by mortgage pools that include sub-prime mortgages secured by residential real estate. Sub-prime loans often have high interest rates and are often made to borrowers with credit scores that would not qualify them for prime conventional loans. In recent years, banks made a great number of the sub-prime residential mortgage loans with high interest rates, floating interest rates, interest rates that reset from time to time, and/or interest-only payment features that expire over time. These terms, coupled with rising interest rates, have caused an increasing number of homeowners to default on their mortgages. Purchasers of mortgage-backed securities collateralized by mortgage pools that include risky sub-prime residential mortgages have experienced severe losses as a result of the defaults and such losses have had a negative impact on the CMBS market. 
Federal Income Tax Risks 
Failure to continue to qualify as a REIT would adversely affect our operations and our ability to make distributions. 
If we fail to continue to qualify as a REIT for any taxable year, we will be subject to federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to you because of the additional tax liability. In addition, distributions to you would no longer qualify for the dividends paid deduction, and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax. Our failure to continue to qualify as a REIT would adversely affect the return on your investment. 
In order to continue to qualify as a REIT after the Merger, if it is completed, we plan to hold substantially all of our non-qualifying REIT assets and conduct substantially all of our non-qualifying REIT income activities in or through one or more taxable real estate investment trust subsidiaries (“TRSs”).
Because the REIT rules limit our ability to receive distributions from TRSs, our ability to fund distribution payments using cash generated through our TRSs may be limited.
If the Merger is completed, we intend to operate our acquired investment management and real estate advisory business through one or more TRSs. Our ability to receive dividend distributions from our TRSs is limited by the rules with which we must comply to maintain our status as a REIT. In particular, at least 75% of our gross income for each taxable year as a REIT must be derived from real estate-related sources, which principally includes gross income from the leasing of our properties. Consequently, no more than 25% of our gross income may consist of dividend income from our TRSs and other non-qualifying types of income. Thus, our ability to receive distributions from our TRSs may be limited and may impact our ability to fund distributions to our stockholders using cash flows from our TRSs. Specifically, if our TRSs became highly profitable, we might become limited in our ability to receive dividends from our TRSs in an amount required to fund distributions to our stockholders commensurate with that profitability.

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If we fail to qualify for taxation as a REIT, we may need to borrow funds or liquidate some investments to pay the additional tax liability. Were this to occur, funds available for investment would be reduced. REIT qualification involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (“Internal Revenue Code”) to our operations, as well as various factual determinations concerning matters and circumstances not entirely within our control. There are limited judicial or administrative interpretations of these provisions. Although we plan to continue to operate in a manner consistent with the REIT qualification rules, we cannot assure you that we will so qualify or remain so qualified.
Our ownership of our TRSs will be subject to limitations that could prevent us from growing our investment management and real estate advisory business, and our transactions with our TRSs could cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on an arm’s-length basis.
Overall, no more than 25% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs, and compliance with this limitation could limit our ability to grow our investment management business. In addition, the Internal Revenue Code limits the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The Internal Revenue Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. We intend to monitor the value of our respective investments in our TRSs for the purpose of ensuring compliance with TRS ownership limitations and will structure our transactions with our TRSs on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the 25% TRS limitation or to avoid application of the 100% excise tax.
Re-characterization of sale-leaseback transactions may cause us to lose our REIT status. 
We may purchase properties and lease them back to the sellers of such properties. While we will use our best efforts to structure any such sale-leaseback transaction so that the lease will be characterized as a “true lease,” thereby allowing us to be treated as the owner of the property for federal income tax purposes, the IRS could challenge such characterization. In the event that any sale-leaseback transaction is challenged and re-characterized as a financing transaction or loan for federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If a sale-leaseback transaction were so re-characterized, we might fail to satisfy the REIT qualification “asset tests” or the “income tests” and, consequently, lose our REIT status effective with the year of re-characterization. Alternatively, the amount of our REIT taxable income could be recalculated, which might also cause us to fail to meet the distribution requirement for a taxable year.
You may have current tax liability on distributions you elect to reinvest in our common stock. 
If you participate in our DRIP, you will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a nontaxable distribution. In addition, you will be treated, for tax purposes, as having received an additional distribution to the extent the shares are purchased at a discount to fair market value. As a result, unless you are a tax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of the common stock received.
Distributions payable by REITs do not qualify for the reduced tax rates that apply to other corporate distributions. 
Tax legislation enacted in 2003, as amended 2005 and 2010, generally reduces the maximum U.S. federal income tax rate for distributions payable by corporations to domestic stockholders that are individuals, trusts or estates to 15% prior to 2013. Distributions payable by REITs, however, generally continue to be taxed at the normal rate applicable to the individual recipient, rather than the 15% preferential rate. Our distributions will be taxed as ordinary income at the non-preferential rate, to the extent they are from our current or accumulated earnings and profits; to the extent distributions exceed our current or accumulated earnings and profits, they will be treated first as a nontaxable distribution, reducing the tax basis in each U.S. stockholder’s shares (but not below zero), then the distributions will be taxed as gain from the sale of shares. You should discuss the difference in treatment of REIT distributions and regular corporate distributions with your tax advisor. 

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If our operating partnership fails to maintain its status as a partnership, its income may be subject to taxation, which would reduce the cash available to us for distribution to you. 
We intend to maintain the status of CCPT III OP, our operating partnership, as a partnership for federal income tax purposes. However, if the IRS were to successfully challenge the status of our operating partnership as an entity taxable as a partnership, CCPT III OP would be taxable as a corporation. In such event, this would reduce the amount of distributions that the operating partnership could make to us. This could also result in our losing REIT status, and becoming subject to a corporate level tax on our income. This would substantially reduce the cash available to us to make distributions to you and the return on your investment. In addition, if any of the partnerships or limited liability companies through which CCPT III OP owns its properties, in whole or in part, loses its characterization as a partnership for federal income tax purposes, it would be subject to taxation as a corporation, thereby reducing distributions to our operating partnership. Such a re-characterization of an underlying property owner also could threaten our ability to maintain REIT status.
In certain circumstances, we may be subject to federal and state income taxes as a REIT, which would reduce our cash available for distribution to you. 
Even if we maintain our status as a REIT, we may be subject to federal income taxes or state taxes. For example, net income from the sale of properties that are “dealer” properties sold by a REIT (a “prohibited transaction” under the Internal Revenue Code) will be subject to a 100% tax. We may not be able to make sufficient distributions to avoid excise taxes applicable to REITs. We may also decide to retain income we earn from the sale or other disposition of our property and pay income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability. We may also be subject to state and local taxes on our income or property, either directly or at the level of CCPT III OP or at the level of the other entities through which we indirectly own our assets. Any federal or state taxes we pay will reduce our cash available for distribution to you. 
Legislative or regulatory action could adversely affect the returns to our investors. 
In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of the federal income tax laws applicable to investments similar to an investment in our common stock. Additional changes to the tax laws are likely to continue to occur, and we cannot assure our stockholders that any such changes will not adversely affect their taxation. Such changes could have an adverse effect on an investment in our stock or on the market value or the resale potential of our assets. Our stockholders are urged to consult with their own tax advisor with respect to the impact of recent legislation on their investment in our stock and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.
Congress passed major federal tax legislation in 2003, with modifications to that legislation in 2005 and an extension of that legislation by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. One of the changes effected by that legislation generally reduced the maximum tax rate on qualified dividends paid by corporations to individuals to 15.0% through 2012. On January 3, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, extending such 15.0% qualified dividend rate for 2013 and subsequent taxable years for those unmarried individuals with income under $400,000 and for married couples with income under $450,000. For those with income above such thresholds, the qualified dividend rate is 20.0%. REIT distributions, however, generally do not constitute qualified dividends and consequently are not eligible for this reduced maximum tax rate. Therefore, our stockholders will pay federal income tax on our distributions (other than capital gains dividends or distributions which represent a return of capital for tax purposes) at the applicable “ordinary income” rate, the maximum of which is currently 39.6%. However, as a REIT, we generally would not be subject to federal or state corporate income taxes on that portion of our ordinary income or capital gain that we distribute currently to you, and we thus expect to avoid the “double taxation” to which other corporations are typically subject.
            Although REITs continue to receive substantially better tax treatment than entities taxed as corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be taxed for federal income tax purposes as a corporation. As a result, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a corporation, without the vote of our stockholders. Our board of directors has fiduciary duties to us and our stockholders and could only cause such changes in our tax treatment if it determines in good faith that such changes are in our stockholders’ best interest.

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Foreign purchasers of our common stock may be subject to FIRPTA tax upon the sale of their shares. 
A foreign person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to the Foreign Investment in Real Property Tax Act of 1980, as amended, known as FIRPTA, on the gain recognized on the disposition. Such FIRPTA tax does not apply, however, to the disposition of stock in a REIT if the REIT is “domestically controlled.” A REIT is “domestically controlled” if less than 50% of the REIT’s stock, by value, has been owned directly or indirectly by persons who are not qualifying U.S. persons during a continuous five-year period ending on the date of disposition or, if shorter, during the entire period of the REIT’s existence. We cannot assure you that we will continue to qualify as a “domestically controlled” REIT. If we were to fail to so qualify, gain realized by foreign investors on a sale of our shares would be subject to FIRPTA tax, unless our shares were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 5% of the value of our outstanding common stock.  
For qualified accounts, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, it is possible that you may be subject to the imposition of significant excise taxes and penalties with respect to the amount invested.  
If you are investing the assets of a pension, profit-sharing, 401(k), Keogh or other qualified retirement plan or the assets of an IRA in our common stock, you should satisfy yourself that, among other things: 
•
your investment is consistent with your fiduciary obligations under ERISA and the Internal Revenue Code;
•
your investment is made in accordance with the documents and instruments governing your plan or IRA, including your plan’s investment policy;
•
your investment satisfies the prudence and diversification requirements of ERISA and other applicable provisions of ERISA and the Internal Revenue Code;
•
your investment will not impair the liquidity of the plan or IRA;
•
your investment will not produce unrelated business taxable income for the plan or IRA;
•
you will be able to value the assets of the plan annually in accordance with ERISA requirements and applicable provisions of the plan or IRA; and
•
your investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.
Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Internal Revenue Code may result in the imposition of civil and criminal penalties and could subject the fiduciary to equitable remedies. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary who authorized or directed the investment may be subject to the imposition of civil and criminal penalties and could subject the fiduciary to equitable remedies. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested.
ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.
ITEM 2.    PROPERTIES    
As of December 31, 2012, we owned, through separate wholly-owned limited partnerships, limited liability companies or consolidated joint venture arrangements, a portfolio of 1,014 properties located in 47 states comprising 43.1 million gross rentable square feet of commercial space including square feet of buildings, which are on land subject to ground leases. As of December 31, 2012, 807 of the properties were freestanding, single-tenant retail properties, 120 of the properties were freestanding, single-tenant commercial properties, 70 of the properties were multi-tenant retail properties, 16 of the properties were office and industrial properties and one was a land parcel under construction. As of December 31, 2012, 99% of our rentable square feet was leased, with a weighted average remaining lease term of 12.7 years. As of December 31, 2012, we had outstanding debt of $3.3 billion, secured by certain of our properties and the related tenant leases.

40

In addition, through seven unconsolidated joint venture arrangements, as of December 31, 2012, we had interests in 12 properties comprising 2.3 million gross rentable square feet of commercial space for an aggregate investment of $96.8 million (the “Unconsolidated Joint Ventures”).
The following table shows the tenant diversification of our real estate portfolio, including properties owned through consolidated joint venture arrangements that held real estate assets with an aggregate book value of $55.0 million (the “Consolidated Joint Ventures”), based on gross annualized rental revenue, as of December 31, 2012:
 
 
 
 
 
 
2012 Gross
 
Percentage of
 
 
Total
 
 
 
Annualized
 
2012 Gross
 
 
Number
 
Leased
 
Rental Revenue
 
Annualized
Tenant
 
of Leases
 
Square Feet (1)
 
(in thousands)
 
Rental Revenue
Walgreens - drugstore
 
76

 
1,117,766

 
$
28,421

 
5
%
Albertson’s - grocery
 
34

 
1,973,485

 
24,075

 
4
%
PetSmart - pet supplies
 
41

 
1,281,846

 
23,152

 
4
%
CVS - drugstore
 
58

 
914,799

 
22,128

 
4
%
BJ’s Wholesale Club - warehouse club
 
3

 
2,229,933

 
19,106

 
3
%
Apollo Group - education
 
1

 
599,664

 
14,557

 
3
%
Wal-Mart - discount store
 
8

 
1,732,275

 
14,391

 
3
%
L.A. Fitness - fitness
 
17

 
753,001

 
14,160

 
3
%
Amazon - wholesale
 
3

 
3,048,444

 
13,922

 
2
%
Kohl’s - department store
 
20

 
1,599,980

 
13,816

 
2
%
Other
 
1,489

 
27,380,910

 
376,882

 
67
%
 
 
1,750

 
42,632,103

 
$
564,610

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Including square feet of buildings, which are on land subject to ground leases.
The following table shows the tenant industry diversification of our real estate portfolio, including the Consolidated Joint Ventures, based on gross annualized rental revenue, as of December 31, 2012: 
 
 
 
 
 
 
2012 Gross
 
Percentage of
 
 
Total
 
 
 
Annualized
 
2012 Gross
 
 
Number
 
Leased
 
Rental Revenue
 
Annualized
Industry
 
of Leases
 
Square Feet (1)
 
(in thousands)
 
Rental Revenue
Restaurant
 
324

 
2,065,803

 
$
58,077

 
10
%
Grocery
 
72

 
3,904,080

 
50,750

 
9
%
Drugstore
 
134

 
2,032,565

 
50,549

 
9
%
Discount store
 
220

 
4,314,042

 
42,957

 
8
%
Home and garden
 
66

 
3,874,610

 
30,553

 
5
%
Pet supplies
 
48

 
1,387,043

 
24,790

 
4
%
Warehouse club
 
7

 
2,767,089

 
24,203

 
4
%
Healthcare
 
57

 
967,194

 
22,256

 
4
%
Financial services
 
60

 
938,489

 
20,041

 
4
%
Convenience store
 
86

 
370,114

 
18,266

 
3
%
Other
 
676

 
20,011,074

 
222,168

 
40
%
 
 
1,750

 
42,632,103

 
$
564,610

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Including square feet of buildings, which are on land subject to ground leases.

41

The following table shows the geographic diversification of our real estate portfolio, including the Consolidated Joint Ventures, based on gross annualized rental revenue, as of December 31, 2012:
 
 
Total
 
 
 
2012 Gross
 
Percentage of
 
 
Number
 
 
 
Annualized
 
2012 Gross
 
 
of
 
Rentable
 
Rental Revenue
 
Annualized
Location
 
Properties
 
Square Feet (1)
 
(in thousands)
 
Rental Revenue
Texas
 
190

 
6,090,708

 
$
95,231

 
17
%
Arizona
 
41

 
2,979,354

 
49,148

 
9
%
California
 
21

 
2,865,634

 
40,209

 
7
%
Florida
 
81

 
3,299,153

 
39,956

 
7
%
Illinois
 
46

 
1,508,238

 
29,214

 
5
%
Georgia
 
38

 
1,992,309

 
25,572

 
5
%
Michigan
 
43

 
1,680,617

 
21,630

 
4
%
New Jersey
 
14

 
893,871

 
20,449

 
4
%
Virginia
 
24

 
1,348,402

 
18,119

 
3
%
Ohio
 
67

 
1,666,352

 
17,671

 
3
%
Other
 
449

 
18,761,717

 
207,411

 
36
%
 
 
1,014

 
43,086,355

 
$
564,610

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Including square feet of buildings, which are on land subject to ground leases.
Leases
Although there are variations in the specific terms of the leases of our properties, the following is a summary of the general structure of our leases. Generally, the leases of the properties owned provide for initial terms of 10 to 20 years. As of December 31, 2012, the weighted average remaining lease term, including the Consolidated Joint Ventures’ leases, was 12.7 years. The properties generally are leased under net leases pursuant to which the tenant bears responsibility for substantially all property costs and expenses associated with ongoing maintenance and operation, including utilities, property taxes and insurance. Certain of the leases require us to maintain the roof and structure. The leases of the properties provide for annual rental payments (payable in monthly installments) ranging from $6,000 to $14.6 million (average of $321,000). Certain leases provide for limited increases in rent as a result of fixed increases or increases in the consumer price index.
Generally, the property leases provide the tenant with one or more multi-year renewal options, subject to generally the same terms and conditions as the initial lease term. Certain leases also provide that in the event we wish to sell the property subject to that lease, we first must offer the lessee the right to purchase the property on the same terms and conditions as any offer which we intend to accept for the sale of the property.
The following table shows lease expirations of our real estate portfolio, including the Consolidated Joint Ventures, as of December 31, 2012, during each of the next ten years and thereafter, assuming no exercise of renewal options:

42

 
 
 
 
 
 
2012 Gross
 

 
 
Total
 
 
 
Annualized
 
Percentage of
 
 
Number
 
Leased
 
Rental Revenue
 
2012 Gross

 
of Leases
 
Square Feet
 
Expiring
 
Annualized
Year of Lease Expiration
 
Expiring
 
Expiring (1)
 
(in thousands)
 
Rental Revenue
2013
 
86

 
310,005

 
$
5,083

 
1
%
2014
 
72

 
303,575

 
5,623

 
1
%
2015
 
87

 
431,498

 
7,063

 
1
%
2016
 
112

 
1,168,200

 
15,322

 
3
%
2017
 
138

 
1,102,430

 
14,422

 
3
%
2018
 
124

 
2,083,056

 
26,227

 
5
%
2019
 
88

 
2,119,088

 
26,444

 
5
%
2020
 
52

 
1,116,764

 
14,255

 
3
%
2021
 
83

 
2,906,899

 
35,792

 
6
%
2022
 
69

 
2,809,085

 
22,808

 
4
%
Thereafter
 
839

 
28,281,503

 
391,571

 
68
%
 
 
1,750

 
42,632,103

 
$
564,610

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Including square feet of buildings, which are on land subject to ground leases.
Notes Payable and Other Borrowings Information
As of December 31, 2012, we and the Consolidated Joint Ventures had $3.3 billion of debt outstanding, consisting of (1) $2.3 billion in fixed rate mortgage loans (the “Fixed Rate Debt”), which includes $465.5 million of variable rate mortgage loans swapped to fixed rates, (2) $112.7 million in variable rate mortgage loans, including construction facilities, (the “Variable Rate Debt”), (3) $767.8 million outstanding under the Credit Facility and (4) $100.1 million outstanding under repurchase agreements (the “Repurchase Agreements”). The Fixed Rate Debt has annual interest rates ranging from 2.75% to 6.83% per annum, with certain debt containing LIBOR floors, and various maturity dates ranging from March 2013 through January 2023, with a weighted average years to maturity of 6.9 years. The Variable Rate Debt has interest rates ranging from LIBOR plus 225 basis points to 325 basis points per annum, and various maturity dates from February 2013 through December 2017. The Credit Facility provides borrowings up to $857.5 million, which includes a $278.75 million term loan (the “Term Loan”) and up to $578.75 million in revolving loans (the “Revolving Loans”). The Revolving Loans and Term Loan had a combined weighted average interest rate of 3.37% as of December 31, 2012. The Credit Facility matures in June 2014. The Repurchase Agreements provide for short-term financing in which we pledge our marketable securities as collateral to secure loans made by the lender and generally have a term of 90 days with annual interest rates ranging from LIBOR plus 120 basis points to 175 basis points.
The total debt outstanding has a weighted average years to maturity of 5.3 years and weighted average interest rate of 4.38%. The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the total debt outstanding was $4.8 billion as of December 31, 2012, which excludes the assets that are part of the Credit Facility’s underlying collateral pool of $1.4 billion. See Note 11 to our consolidated financial statements that are part of this Annual Report on Form 10-K for more information regarding the debt outstanding.
The notes payable contain customary default provisions and may generally be prepaid subject to meeting certain requirements and payment of a prepayment premium as specified in the respective loan agreement. Generally, upon the occurrence of an event of default, interest on the mortgage notes will accrue at an annual default interest rate equal to the lesser of (1) the maximum rate permitted by applicable law, or (2) the then-current interest rate plus a percentage specified in the respective loan agreement, which ranges from 3.00% to 6.80%. Notwithstanding the prepayment limitations, we may sell the properties to a buyer that assumes the respective note payable. The transfer would be subject to the conditions set forth in the respective note payable, including without limitation the lender’s approval of the proposed buyer and the payment of the lender’s fees, costs and expenses associated with the sale of the property and the assumption of the loan. Certain notes payable contain customary affirmative, negative and financial covenants, including requirements for minimum net worth and debt service coverage ratios, in addition to limits on leverage ratios and variable rate debt. The notes payable are generally non-recourse to us and CCPT III OP, but both are liable for customary non-recourse carve-outs.

43

ITEM 3.    LEGAL PROCEEDINGS
In connection with the Merger, on March 20, 2013, a putative class action and derivative lawsuit was filed in the Circuit Court for Baltimore City, Maryland against and purportedly on behalf of the Company captioned Strub, et al. v. Cole Holdings Corporation, et al. (“Strub”). The complaint names as defendants Holdings; CR III Advisors; Merger Sub; Cole Capital Advisors, Inc., Equity Fund Advisors, Inc. (an affiliate of Holdings), Cole Capital, and Cole Realty Advisors, Inc. (together, “Cole Holding Entities”); each of the directors of the Company; and the Company. Strub alleges that the defendants breached their fiduciary duties and duties of loyalty, candor and due care by causing the Company to enter into the Merger Agreement, failing to implement appropriate measures to ensure that the Company’s relationship with CR III Advisors did not become a vehicle for wrongful self-dealing, failing to consider and explore strategic alternatives to the Merger, failing to seek stockholder approval for the Merger, and by engaging in self-interested and otherwise conflicted actions. It also alleges that the Merger Sub and Cole Holdings Entities aided and abetted those breaches of fiduciary duty, and that Messrs. Cole and Nemer will be unjustly enriched by and following the Merger. Strub seeks a declaration that the conduct of the defendants is a breach of fiduciary duty or aiding and abetting such breaches and that the Merger Agreement is null and void; an order requiring stockholder approval of any acquisition of CR III Advisors or any Cole Holdings Entities; awarding damages and restitution, and disgorgement by each director; an award of plaintiffs’ reasonable attorneys’ fees, expert fees, interest, and cost of suit, and other relief. On March 28, 2013, Strub sought an injunction against the Merger closing until stockholder approval is obtained. The defendants intend to oppose that application.
In addition, on March 25, 2013, a putative class action lawsuit was filed in the Circuit Court for Baltimore City, Maryland captioned Rodgers v. Cole Credit Property Trust III, et al. (“Rodgers”). This complaint names as defendants the Company; Cole REIT III Operating Partnership, LP (“CCPT III OP”); CR III Advisors; Merger Sub; and each of the Company’s directors. Rodgers alleges that the Company’s directors breached their fiduciary duties by entering into the Merger Agreement, failing to provide transparency and a stockholder vote, structuring the transaction to prevent other potential buyers from buying the Company, and failing to disclose to stockholders a third party’s interest in acquiring the Company. It also alleges that CR III Advisors breached its fiduciary duty by ignoring and failing to disclose a third party offer; and that the Company, CCPT III OP, Merger Sub, and the directors aided and abetted the alleged breach of fiduciary duty by CR III Advisors. Rodgers seeks a declaration that the defendants have committed a gross abuse of trust and have breached and/or aided and abetted breach of fiduciary duties; that the Merger is therefore unlawful and unenforceable, and that the Merger and any related agreements should be rescinded and invalidated; declaring that the Merger and Merger Agreement should be rescinded and parties restored to their original position; imposing a constructive trust in favor of the plaintiff and class on any benefits, property or value improperly received by, traceable to, or in possession of defendants as a result of wrongful conduct; enjoining defendants from consummating the Merger until the Company has a process to obtain a merger agreement providing best possible terms to stockholders; rescinding the Merger to the extent implemented or granting rescissory damages; directing the directors to account to plaintiff and class for damages as a result of their wrongdoing; awarding compensatory damages and interest; awarding costs, including reasonable attorneys’ and experts’ fees; and granting further equitable relief that is deemed just and proper.
The outcome of these matters cannot be predicted at this time and no provisions for losses, if any, have been recorded in our consolidated financial statements that are part of this Annual Report on Form 10-K.
In the ordinary course of business we may become subject to litigation or claims. We are not aware of any material pending legal proceedings, other than as stated above and ordinary routine litigation incidental to our business, to which we are a party or to which our properties are the subject.
ITEM 4.     MINE SAFETY DISCLOSURES
Not applicable.

44

PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
As of March 26, 2013, we had approximately 496.7 million shares of common stock outstanding, held by a total of 101,586 stockholders of record. The number of stockholders is based on the records of DST Systems, Inc., who serves as our registrar and transfer agent.
There is currently no established trading market for our common stock. Therefore, there is a risk that a stockholder may not be able to sell our stock at a time or price acceptable to the stockholder, or at all. Pursuant to the DRIP Offering, we are selling shares of our common stock to the public at a price of $9.50 per share pursuant to an amended and restated DRIP. Pursuant to the terms of our current charter, certain restrictions are imposed on the ownership and transfer of shares.
Unless and until our shares are listed on a national securities exchange in connection with the Merger or otherwise, we cannot guarantee that a public market for the shares will develop. To assist fiduciaries of tax-qualified pension, stock bonus or profit-sharing plans, employee benefit plans and annuities described in Section 403(a) or (b) of the Internal Revenue Code or an individual retirement account or annuity described in Section 408 of the Internal Revenue Code subject to the annual reporting requirements of ERISA and IRA trustees or custodians in preparation of reports relating to an investment in the shares, we intend to provide reports of the per share estimated value of our common stock to those fiduciaries who request such reports. In addition, in order for FINRA members and their associated persons to participate in the offering and sale of our shares of common stock, we are required pursuant to FINRA Rule 5110(f)(2)(m) to disclose in each annual report distributed to investors a per share estimated value of the shares, the method by which is was developed and the date of the data used to develop the estimated value. For these purposes, the deemed value of our common stock is $10.00 per share as of December 31, 2012. However, as set forth above, there is no public trading market for the shares at this time and stockholders may not receive $10.00 per share if a market did exist. In the event that our shares are not listed on a national securities exchange prior to October 27, 2013 (which is 18 months following the completion of our Follow-On Offering), our board of directors intends to establish an estimated value of our shares, which may be based in part on an independent valuation of our properties or of our enterprise as a whole. In such event, prior to the board’s determination of an estimated share value, we intend to use the offering price of shares in the most recent offering as the per share estimated value.
Share Redemption Program
Our board of directors has adopted a share redemption program that enables our stockholders to sell their shares to us in limited circumstances. Our share redemption program permits stockholders to sell their shares back to us after they have held them for at least one year, subject to the significant conditions and limitations described below.
Although we are seeking to amend our charter and list our shares of common stock on the NYSE, our common stock is currently not listed on any national securities exchange. In the event we are able to list our shares on the NYSE, or another national securities exchange, our share redemption program will be terminated. In order to provide stockholders with the benefit of interim liquidity, stockholders who have held their shares for at least one year may present all or a portion consisting of at least the lesser of (1) 25% of the holder’s shares; or (2) a number of shares with an aggregate redemption price of at least $2,500 in accordance with the procedures outlined below. At that time, we may, subject to the conditions and limitations described below, redeem the shares presented for redemption for cash to the extent that we have sufficient funds available to fund such redemption. We will not pay to Cole Capital, our board of directors or our advisor or its affiliates any fees to complete any transactions under our share redemption program.
Until such time as our shares are listed on a national securities exchange or, if our shares are not listed, until our board of directors determines a reasonable estimate of the value of our shares, the redemption price per share (other than for shares purchased pursuant to our DRIP) will depend on the price paid for the shares and the length of time the stockholders have held such shares as follows: after one year from the purchase date, 95% of the amount paid for each share; after two years from the purchase date, 97.5% of the amount paid for each share; and after three years from the purchase date, 100% of the amount paid for each share. During this time period, the redemption price for shares purchased pursuant to our DRIP will be the amount paid for such shares. (In each case, the redemption price will be adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to our common stock). Accordingly, the redemption price will reflect a stockholder’s reduced purchase price if selling commissions were discounted or waived and/or a dealer manager fee was waived. At any time we are engaged in an offering of shares, the per share price for shares purchased under our redemption program will always be equal to or lower than the applicable per share offering price.

45

In the event that our shares are not ultimately listed on the NYSE or any other national securities exchange, and after such time as our board of directors has determined a reasonable estimated value of our shares, the per share redemption price (other than for shares purchased pursuant to our DRIP) will depend on the length of time the stockholders have held such shares as follows: after one year from the purchase date, 95% of the Estimated Share Value (defined below); after two years from the purchase date, 97.5% of the Estimated Share Value; and after three years from the purchase date, 100% of the Estimated Share Value. During this time period, the redemption price for shares purchased pursuant to our DRIP will be 100% of the Estimated Share Value. (In each case, the redemption price will be adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to our common stock.) For purposes of establishing the redemption price per share, “Estimated Share Value” shall mean the most recently disclosed reasonable estimated value of our shares of common stock as determined by our board of directors, including a majority of our independent directors.
In determining the redemption price, we consider shares to have been redeemed from a stockholder’s account on a first in, first out basis. Our board of directors will announce any redemption price adjustment and the time period of its effectiveness as a part of its regular communications with our stockholders. If we have sold property and have made one or more special distributions to our stockholders of all or a portion of the net proceeds from such sales subsequent to the establishment of the Estimated Share Value, the per share redemption price will be reduced by the net sale proceeds per share distributed to investors prior to the redemption date. Our board of directors will, in its sole discretion, determine which distributions, if any, constitute a special distribution. While our board of directors does not have specific criteria for determining a special distribution, we expect that a special distribution will only occur upon the sale of a property and the subsequent distribution of the net sale proceeds. In no event will the Estimated Share Value established for purposes of our share redemption program exceed the then-current estimated share value established for purposes of our DRIP. 
We may waive the one-year holding period requirement upon request due to a stockholder’s death or bankruptcy or other exigent circumstances as determined by our advisor. In the event of the death of a stockholder, we must receive notice from the stockholder’s estate within 270 days after the stockholder’s death. In addition, in the event that a stockholder redeems all of their shares, any shares that were purchased pursuant to our DRIP will be excluded from the one-year holding requirement. Also, for purposes of the one-year-holding period, limited partners of CCPT III OP who exchanged their limited partnership units for shares of our common stock will be deemed to have owned their shares as of the date the CCPT III OP units were issued. Shares redeemed in connection with a stockholder’s death, during the term of our offering and until such time as our board of directors determines a reasonable estimated value of our shares, will be redeemed at a purchase price equal to 100% of the amount actually paid for the shares. Shares redeemed in connection with a stockholder’s death, after such time as our board of directors has determined a reasonable estimated value of our shares, will be redeemed at a purchase price per share equal to 100% of the Estimated Share Value. Shares redeemed in connection with a stockholder’s bankruptcy or other exigent circumstance within one year from the purchase date will be redeemed at a price per share equal to the price per share we would pay had the stockholder held the shares for one year from the purchase date.  
 We limit the number of shares redeemed pursuant to our share redemption program as follows: (1) we will not redeem in excess of 5% of the weighted average number of shares outstanding during the trailing twelve months prior to the end of the fiscal quarter for which the redemptions are being paid; and (2) funding for the redemption of shares will be limited to the net proceeds we receive from the sale of shares under our DRIP. In an effort to accommodate redemption requests throughout the calendar year, we intend to limit quarterly redemptions to approximately one-fourth of 5% (1.25%) of the weighted average number of shares outstanding during the trailing twelve month period ending on last day of the fiscal quarter, and funding for redemptions for each quarter generally will be limited to the net proceeds we receive from the sale of shares in the respective quarter under our DRIP; however, our management may waive these quarterly limitations in its sole discretion. Any of the foregoing limits might prevent us from accommodating all redemption requests made in any quarter, in which case quarterly redemptions will be made pro rata, except as described below. Our management also reserves the right in its sole discretion at any time, and from time to time, to reject any request for redemption for any reason.
Our program provides that we will redeem our shares no later than the end of the month following the end of each fiscal quarter. Requests for redemption must be received on or prior to the end of the fiscal quarter in order for us to repurchase the shares in the month following the end of that fiscal quarter. A stockholder may withdraw a request to have shares redeemed, but all such requests generally must be submitted prior to the last business day of the applicable fiscal quarter. Any redemption capacity that is not used as a result of the withdrawal or rejection of redemption requests may be used to satisfy the redemption requests of other stockholders received for that fiscal quarter, and such redemption payments may be made at a later time than when that quarter’s redemption payments are made.

46

We will determine whether we have sufficient funds and/or shares available as soon as practicable after the end of each fiscal quarter, but in any event prior to the applicable payment date. If we cannot purchase all shares presented for redemption in any fiscal quarter, based upon insufficient cash available and/or the limit on the number of shares we may redeem during any quarter or year, we will give priority to the redemption of deceased stockholders’ shares. While deceased stockholders’ shares will be included in calculating the maximum number of shares that may be redeemed in any annual or quarterly period, they will not be subject to the annual or quarterly percentage caps; therefore, if the volume of requests to redeem deceased stockholders’ shares in a particular quarter were large enough to cause the annual or quarterly percentage caps to be exceeded, even if no other redemption requests were processed, the redemptions of deceased stockholders’ shares would be completed in full, assuming sufficient proceeds from the sale of shares under our DRIP were available. If sufficient proceeds from the sale of shares under our DRIP were not available to pay all such redemptions in full, the requests to redeem deceased stockholders’ shares would be honored on a pro rata basis. We next will give priority to requests for full redemption of accounts with a balance of 250 shares or less at the time we receive the request, in order to reduce the expense of maintaining small accounts. Thereafter, we will honor the remaining redemption requests on a pro rata basis. Following such quarterly redemption period, the investor may resubmit the unsatisfied portion of the prior request for redemption, a new request for redemption of such shares must be submitted prior to the last day of the new quarter. Unfulfilled requests for redemption will not be carried over automatically to subsequent redemption periods.
Our board of directors may choose to amend, suspend or terminate our share redemption program at any time upon 30 days’ notice to our stockholders. Additionally, we will be required to discontinue sales of shares under our DRIP on the date we sell all of the shares registered for sale under our DRIP, unless we file a new registration statement with the SEC and applicable states. Because the redemption of shares will be funded with the net proceeds we receive from the sale of shares under our DRIP, the discontinuance or termination of our DRIP will adversely affect our ability to redeem shares under the share redemption program. We will notify our stockholders of such developments (1) in our next annual or quarterly report or (2) by means of a separate mailing, accompanied by disclosure in a current or periodic report under the Exchange Act.
Our share redemption program is only intended to provide interim liquidity for stockholders until we list our shares on the NYSE or another liquidity event occurs, such as the sale of our company or a liquidation of our portfolio. In the event our shares are listed on the NYSE, our share redemption program will be terminated; however, we cannot guarantee that a liquidity event will occur in connection with the Merger Agreement or otherwise.
The shares we redeem under our share redemption program will be canceled and will return to the status of authorized but unissued shares. We do not intend to resell such shares to the public unless they are first registered with the SEC under the Securities Act and under appropriate state securities laws or otherwise sold in compliance with such laws.
During the year ended December 31, 2012, we received valid redemption requests relating to approximately 7.0 million shares, which we redeemed in full for $68.6 million (an average of $9.80 per share) under our share redemption program. A valid redemption request is one that complies with the applicable requirements and guidelines of our current share redemption program set forth above. During the year ended December 31, 2011, we redeemed approximately 4.3 million shares under our share redemption program, at an average redemption price of $9.69 per share for an aggregate redemption price of $41.9 million. During the years ended December 31, 2012 and 2011, we issued approximately 17.8 million and approximately 11.6 million shares of common stock under our DRIP, respectively, for proceeds of $169.1 million and $110.1 million, respectively, which was recorded as redeemable common stock on the consolidated balance sheets, net of redeemed shares.
During the three-month period ended December 31, 2012, we redeemed shares as follows:
 
 
 
 
 
 
 
 
Total Number of Shares
 
Maximum Number of
 
 
 
 
Total Number
 
 
 
 
Purchased as Part
 
Shares that May Yet Be
 
 
 
 
of Shares
 
 
Average Price
 
of Publicly Announced
 
Purchased Under the
 
 
 
 
Redeemed
 
 
Paid per Share
 
Plans or Programs
 
Plans or Programs
 
 
October 2012
 
12,306

 
$
9.06

 
12,306

 
(1
)
 
 
November 2012
 
2,273,264

 
$
9.84

 
2,273,264

 
(1
)
 
 
December 2012
 
—

 
$
—

 
—

 
(1
)
 
 
Total
 
2,285,570

 
 
 
 
2,285,570

 
(1
)
 
________________
(1) A description of the maximum number of shares that may be purchased under our redemption program is included in the narrative preceding this table.

47

Distributions
We elected to be taxed and qualified, and have continued to qualify, as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2009. As a REIT, we have made, and intend to continue to make, distributions each taxable year equal to at least 90% of our taxable income (computed without regard to the dividends paid deduction and excluding net capital gains). One of our primary goals is to pay regular (monthly) distributions to our stockholders.
For federal income tax purposes, distributions to common stockholders are characterized as ordinary dividends, capital gain distributions, or nontaxable distributions. To the extent that we make a distribution in excess of our current or accumulated earnings and profits, the distribution will be a nontaxable return of capital, reducing the tax basis in each U.S. stockholder’s shares. In addition, the amount of distributions in excess of a U.S. stockholder’s tax basis in such shares will be taxable as a gain realized from the sale of those shares.
The following table shows the character of the distributions we paid on a per share basis during the years ended December 31, 2012 and 2011 (in thousands, except per share data):
 
 
 
Total
 
Distributions Paid
 
Nontaxable
 
Ordinary
 
Capital Gain
 
 
 
 
Distributions Paid
 
per Common Share
 
Distributions
 
Dividends
 
Distributions
 
 
2012
 
$
295,652

 
$
0.64
 
$
0.21
 
$
0.33
 
$
0.10

 
 
2011
 
$
194,877

 
$
0.63
 
$
0.24
 
$
0.39
 
$
—

 
 
2010
 
$
112,613

 
$
0.64
 
$
0.29
 
$
0.35
 
$
—

 
Use of Public Offering Proceeds    
On October 1, 2008, our Registration Statement on Form S-11 (SEC Registration No. 333-149290), covering a public offering of up to 230.0 million shares of common stock to be offered at a price of $10.00 per share, subject to reduction in certain circumstances, was declared effective under the Securities Act.  The Registration Statement also covered up to 20.0 million shares of common stock available pursuant to our DRIP.  On September 22, 2010, our Registration Statement on Form S-11 (SEC Registration No. 333-164884) for the Follow-on Offering of up to 275.0 million shares of our common stock was declared effective by the SEC. The Company commenced sales of its common stock pursuant to the Follow-on Offering following the termination of the Initial Offering on October 1, 2010. The remaining approximately 32.5 million unsold shares in the Initial Offering have been deregistered. On April 27, 2012, the Company terminated the Follow-on Offering. At the completion of the Follow-on Offering, a total of approximately 262.2 million shares of common stock had been issued, including approximately 242.9 million shares issued in the primary offering and approximately 19.3 million shares issued pursuant to our DRIP. The remaining approximately 12.8 million unsold shares in the Follow-on Offering have been deregistered. In addition, On March 14, 2012, we registered 75.0 million shares of common stock under our DRIP pursuant to a Registration Statement on Form-S-3.
As of December 31, 2012, we had issued approximately 492.1 million shares in the Offerings for gross proceeds of $4.9 billion, out of which we paid $401.1 million in selling commissions and dealer manager fees and $62.1 million in organization and offering costs to our advisor or its affiliates. The net offering proceeds were used to acquire $7.1 billion in real estate and related assets and pay $201.6 million in acquisition related expenses, including costs of $163.9 million in acquisition fees and expense reimbursements to our advisor or its affiliates. As of March 26, 2013, we have sold approximately 496.7 million shares in the Offerings for gross offering proceeds of $4.9 billion.

48

ITEM 6.    SELECTED FINANCIAL DATA
The following data should be read in conjunction with our consolidated financial statements and the notes thereto and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K. The selected financial data (in thousands, except share and per share amounts) presented below was derived from our consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
For the Period from
 
 
 
 
 
 
 
 
 
 
January 22, 2008
 
 
 
 
 
 
 
 
 
 
(Date of Inception) to
 
 
Year Ended December 31,
 
December 31,
 
 
2012
 
2011
 
2010
 
2009
 
2008
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Total investment in real estate and related assets, net
$
7,078,513

 
$
5,324,434

 
$
3,035,498

 
$
701,844

 
$
—

Cash and cash equivalents
$
192,504

 
$
216,353

 
$
109,942

 
$
278,717

 
$
172

Restricted cash
$
18,444

 
$
17,540

 
$
12,123

 
$
1,191

 
$
2,849

Total assets
$
7,453,725

 
$
5,697,568

 
$
3,243,658

 
$
1,005,895

 
$
3,033

Notes payable and other borrowings
$
3,292,048

 
$
2,373,984

 
$
1,061,207

 
$
129,302

 
$
—

Due to affiliates
$
4,525

 
$
4,847

 
$
804

 
$
743

 
$
—

Acquired below market lease intangibles, net
$
113,607

 
$
93,050

 
$
66,509

 
$
19,701

 
$
—

Total liabilities
$
3,536,315

 
$
2,579,204

 
$
1,180,608

 
$
162,050

 
$
2,943

Redeemable common stock
$
234,578

 
$
134,101

 
$
65,898

 
$
12,382

 
$
—

Stockholders’ equity
$
3,679,025

 
$
2,982,988

 
$
1,996,781

 
$
831,463

 
$
99

Operating Data:
 
 
 
 
 
 
 
 
 
Total revenue
$
542,942

 
$
323,980

 
$
118,238

 
$
18,721

 
$
—

General and administrative expenses
$
14,915

 
$
10,155

 
$
5,905

 
$
2,141

 
$
—

Property operating expenses
$
49,278

 
$
24,045

 
$
6,916

 
$
582

 
$
105

Property and asset management expenses
$
46,364

 
$
27,225

 
$
10,378

 
$
1,672

 
$
—

Acquisition related expenses
$
63,892

 
$
59,433

 
$
50,096

 
$
15,873

 
$
—

Depreciation and amortization
$
159,609

 
$
94,255

 
$
32,467

 
$
4,527

 
$
—

Operating income (loss)
$
208,884

 
$
108,867

 
$
12,476

 
$
(6,074
)
 
$
(105
)
Interest expense
$
140,113

 
$
78,968

 
$
22,969

 
$
2,352

 
$
—

Income (loss) from continuing operations
$
87,855

 
$
31,718

 
$
(9,422
)
 
$
(7,926
)
 
$
(101
)
Net income (loss) attributable to the Company
$
203,338

 
$
45,296

 
$
(6,293
)
 
$
(7,821
)
 
$
(101
)
Modified funds from operations(1)
$
331,016

 
$
212,853

 
$
93,420

 
$
16,217

 
$
—

Cash Flow Data:
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
$
242,464

 
$
145,681

 
$
35,792

 
$
75

 
$
(28
)
Net cash used in investing activities
$
(1,708,688
)
 
$
(2,350,677
)
 
$
(2,340,776
)
 
$
(702,105
)
 
$
(2,849
)
Net cash provided by financing activities
$
1,442,375

 
$
2,311,407

 
$
2,136,209

 
$
980,575

 
$
3,049

Per Share Data:
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations per common share - basic and diluted
$
0.19

 
$
0.10

 
$
(0.05
)
 
$
(0.20
)
 
$
(5.06
)
Net income (loss) attributable to the Company - basic and diluted
$
0.44

 
$
0.15

 
$
(0.04
)
 
$
(0.20
)
 
$
(5.06
)
Distributions declared
$
0.65

 
$
0.65

 
$
0.70

 
$
0.68

 
$
—

Weighted average shares outstanding - basic and diluted
463,216,187

 
309,363,838

 
174,764,966

 
40,060,709

 
20,000

________________
(1) See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations and Modified Funds from Operations” for information regarding why we present modified funds from operations and for a reconciliation of this non-GAAP financial measure to net income (loss). As we commenced our principal operations on January 6, 2009, this non-GAAP financial measure is not applicable for the period from January 22, 2008 to December 31, 2008.

49

ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Selected Financial Data” section of this Annual Report on Form 10-K and our accompanying consolidated financial statements and the notes thereto. See also “Cautionary Note Regarding Forward—Looking Statements” preceding Part I.
Overview
We were formed on January 22, 2008 to acquire and operate a diverse portfolio of core commercial real estate investments primarily consisting of necessity retail properties located throughout the United States, including U.S. protectorates. We commenced our principal operations on January 6, 2009. Prior to such date, we were considered a development stage company. We acquired our first real estate property on January 6, 2009. We have no paid employees and are externally advised and managed by our advisor. We elected to be taxed, and currently qualify, as a REIT for federal income tax purposes.
We completed our Follow-on Offering on April 27, 2012 and will continue to issue shares of common stock under the DRIP Offering until such time as our shares are listed on a national securities exchange or the DRIP Offering is otherwise terminated by our board of directors. We expect that property acquisitions in 2013 and future periods, if any, will be funded by proceeds from the strategic sale of properties and other investments, financing of the acquired properties, proceeds from our DRIP Offering and cash flows from operations. We expect property acquisitions in future periods to be less than acquisitions in 2012.
Our operating results and cash flows are primarily influenced by rental income from our commercial properties, interest expense on our property acquisition indebtedness and acquisition and operating expenses. Rental and other property income accounted for 87%, 91% and 92% of total revenue during the years ended December 31, 2012, 2011 and 2010 respectively. As 99% of our rentable square feet was under lease as of December 31, 2012, with a weighted average remaining lease term of 12.7 years, we believe our exposure to changes in commercial rental rates on our portfolio is substantially mitigated, except for vacancies caused by tenant bankruptcies or other factors. Our advisor regularly monitors the creditworthiness of our tenants by reviewing the tenant’s financial results, credit rating agency reports (if any) on the tenant or guarantor, the operating history of the property with such tenant, the tenant’s market share and track record within its industry segment, the general health and outlook of the tenant’s industry segment, and other information for changes and possible trends. If our advisor identifies significant changes or trends that may adversely affect the creditworthiness of a tenant, it will gather a more in-depth knowledge of the tenant’s financial condition and, if necessary, attempt to mitigate the tenant credit risk by evaluating the possible sale of the property, or identifying a possible replacement tenant should the current tenant fail to perform on the lease. As of December 31, 2012, the debt leverage ratio of our consolidated real estate assets, which is the ratio of debt to total gross real estate and related assets net of gross intangible lease liabilities, was 45%. As we acquire additional commercial real estate, we will be subject to changes in real estate prices and changes in interest rates on any new indebtedness used to acquire the properties. We may manage our risk of changes in real estate prices on future property acquisitions by entering into purchase agreements and loan commitments simultaneously, or through loan assumption, so that our operating yield is determinable at the time we enter into a purchase agreement, by contracting with developers for future delivery of properties, or by entering into sale-leaseback transactions. We manage our interest rate risk by monitoring the interest rate environment in connection with future property acquisitions or upcoming debt maturities to determine the appropriate financing or refinancing terms, which may include fixed rate loans, variable rate loans or interest rate hedges. If we are unable to acquire suitable properties or obtain suitable financing terms for future acquisitions or refinancing, our results of operations may be adversely affected.
Recent Market Conditions
Beginning in late 2007, domestic and international financial markets experienced significant disruptions that were brought about in large part by challenges in the world-wide banking system. These disruptions severely impacted the availability of credit and contributed to rising costs associated with obtaining credit. Since 2010, the volume of mortgage lending for commercial real estate has been increasing and lending terms have improved and they continue to improve; however, such lending activity continues to be significantly less than previous levels. Although lending market conditions have improved, certain factors continue to negatively affect the lending environment, including the sovereign credit issues of certain countries in the European Union. We have experienced, and may continue to experience, more stringent lending criteria, which may affect our ability to finance certain property acquisitions or refinance our debt at maturity. Additionally, for properties for which we are able to obtain financing, the interest rates and other terms on such loans may be unacceptable. We have managed, and expect to continue to manage, the current mortgage lending environment by considering alternative lending sources, including

50

the securitization of debt, utilizing fixed rate loans, borrowing on our existing Credit Facility, short-term variable rate loans, assuming existing mortgage loans in connection with property acquisitions, or entering into interest rate lock or swap agreements, or any combination of the foregoing.
The economic downturn led to high unemployment rates and a decline in consumer spending. These economic trends have adversely impacted the retail and real estate markets by causing higher tenant vacancies, declining rental rates and declining property values. In 2011 and 2012, the economy improved and continues to show signs of recovery. Additionally, the real estate markets have experienced an improvement in property values, occupancy and rental rates; however, in many markets property values, occupancy and rental rates continue to be below those previously experienced before the economic downturn. As of December 31, 2012, 99% of our rentable square feet was under lease. However, if the recent improvements in economic conditions do not continue, we may experience significant vacancies or be required to reduce rental rates on occupied space. If we do experience significant vacancies, our advisor will actively seek to lease our vacant space; however, such space may be leased at lower rental rates and for shorter lease terms than previously experienced. In addition, as many retailers and other tenants have been delaying or eliminating their store expansion plans, the amount of time required to re-lease a property may increase as a result.
Application of Critical Accounting Policies
Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management’s judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses.
The critical accounting policies outlined below have been discussed with members of the audit committee of the board of directors.
Investment in and Valuation of Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation and amortization. Amounts capitalized to real estate assets consist of the cost of acquisition, excluding acquisition related expenses, construction and any tenant improvements, major improvements and betterments that extend the useful life of the real estate assets and leasing costs. All repairs and maintenance are expensed as incurred.
We are required to make subjective assessments as to the useful lives of our depreciable assets. We consider the period of future benefit of each respective asset to determine the appropriate useful life of the assets. Real estate assets, other than land, are depreciated or amortized on a straight-line basis. The estimated useful lives of our real estate assets by class are generally as follows:
 
Buildings
 
40 years
 
 
Tenant improvements
 
Lesser of useful life or lease term
 
 
Intangible lease assets
 
Lease term
 
We continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate assets may not be recoverable. Impairment indicators that we consider include, but are not limited to, bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions and other factors, a significant decrease in a property’s revenues due to lease terminations, vacancies, co-tenancy clauses, reduced lease rates or other circumstances. When indicators of potential impairment are present, we assess the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, we will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions.

51

When developing estimates of expected future cash flows, we make certain assumptions regarding future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, terminal capitalization and discount rates, the expected number of months it takes to re-lease the property, required tenant improvements and the number of years the property will be held for investment. The use of alternative assumptions in estimating expected future cash flows could result in a different determination of the property’s expected future cash flows and a different conclusion regarding the existence of an impairment, the extent of such loss, if any, as well as the fair value of our real estate assets.
When a real estate asset is identified by us as held for sale, we cease depreciation and amortization of the assets related to the property and estimate the fair value, net of selling costs. If, in our opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount would be recorded to reflect the estimated fair value of the property, net of selling costs.
Allocation of Purchase Price of Real Estate Assets
Upon the acquisition of real properties, we allocate the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and identified intangible assets and liabilities, consisting of the value of above market and below market leases and the value of in-place leases, based in each case on their respective fair values. Acquisition related expenses are expensed as incurred. We utilize independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and building). We obtain an independent appraisal for each real property acquisition. The information in the appraisal, along with any additional information available to us, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by us in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information.
The fair values of above market and below market lease intangibles are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (1) the contractual amounts to be paid pursuant to the in-place leases and (2) an estimate of fair market lease rates for the corresponding in-place leases, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease including any bargain renewal periods, with respect to a below market lease. The above market and below market lease intangibles are capitalized as intangible lease assets or liabilities, respectively. Above market leases are amortized as a reduction to rental income over the remaining terms of the respective leases. Below market leases are amortized as an increase to rental income over the remaining terms of the respective leases, including any bargain renewal periods. In considering whether or not we expect a tenant to execute a bargain renewal option, we evaluate economic factors and certain qualitative factors at the time of acquisition, such as the financial strength of the tenant, remaining lease term, the tenant mix of the leased property, our relationship with the tenant and the availability of competing tenant space. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market or below market lease intangibles relating to that lease would be recorded as an adjustment to rental income.
The fair values of in-place leases include estimates of direct costs associated with obtaining a new tenant, and opportunity costs associated with lost rental and other property income, which are avoided by acquiring a property with an in-place lease. Direct costs associated with obtaining a new tenant include commissions and other direct costs and are estimated, in part, by utilizing information obtained from independent appraisals and management’s consideration of current market costs to execute a similar lease. The intangible values of opportunity costs, which are calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease, are capitalized as intangible lease assets and are amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.
We estimate the fair value of assumed mortgage notes payable based upon indications of current market pricing for similar types of debt financing with similar maturities. Assumed mortgage notes payable are initially recorded at their estimated fair value as of the assumption date, and the difference between such estimated fair value and the mortgage note’s outstanding principal balance is amortized to interest expense over the term of the respective mortgage note payable.
The determination of the fair values of the real estate assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of our purchase price, which could impact our results of operations.

52

Discontinued Operations
Upon the disposal of a real estate asset or the determination of a real estate asset as being held for sale, we determine if the asset disposed of is considered a component of our company. A component is comprised of operations and cash flows that can clearly be distinguished, operationally and for financial reporting purposes, from the rest of our company. If the asset is considered one of our components, the results of operations and gains or losses on the sale of the component are required to be presented in discontinued operations if both of the following criteria are met: (1) the operations and cash flows of the asset have been (or will be) eliminated from the ongoing operations as a result of the disposal transaction and (2) we will not have any significant continuing involvement in the operations of the asset after the disposal transaction. Also, the prior period results of operations for the asset are reclassified and presented in discontinued operations in the prior consolidated statements of operations. Determining whether or not a property qualifies for classification as held for sale under GAAP can involve significant judgment by management.
Upon the disposal of a real estate asset or the determination of a real estate asset as being held for sale, we determine if the property is considered a component of our company. A component is comprised of operations and cash flows that can clearly be distinguished, operationally and for financial reporting purposes, from the rest of our company. If the asset is considered one of our components, the results of operations and gains or losses on the sale of the component are required to be presented as discontinued operations if both of the following criteria are met: (1) the operations and cash flows of the property have been (or will be) eliminated from our ongoing operations as a result of the disposal transaction and (2) we will not have any significant continuing involvement in the operations of the asset after the disposal transaction. Also, the prior period results of operations for the asset are reclassified and presented as discontinued operations in the prior consolidated statements of operations.
Sale of Real Estate Assets
Gains on the sale of real estate assets are generally recognized by the full accrual method when the following criteria are met: (1) the gain is determinable, that is, the collectability of the sales price is reasonably assured or the amount that will not be collectible can be estimated, and (2) the earnings process is virtually complete, that is, we are not obligated to perform significant activities after the sale to earn the gain. Determining whether a real estate transaction qualifies as a sale and for gain recognition under GAAP can involve significant judgment by management.
Revenue Recognition
Certain properties have leases where minimum rental payments increase during the term of the lease. We record rental income for the full term of each lease on a straight-line basis. When we acquire a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of determining this calculation. We defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred.
Investment in Unconsolidated Joint Ventures
Investment in unconsolidated joint ventures as of December 31, 2012 consists of our interest in the Unconsolidated Joint Ventures. We account for the Unconsolidated Joint Ventures using the equity method of accounting as we have the ability to exercise significant influence, but not control, over operating and financial policies of these investments. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for our share of equity in the joint venture’s earnings and distributions. We are required to determine whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of our investment in the joint venture. If an event or change in circumstance has occurred, we are required to evaluate the joint venture for potential impairment and determine if the carrying amount of our investment exceeds its fair value. An impairment charge is recorded when an impairment is deemed to be other-than-temporary. To determine whether impairment is other-than-temporary, we consider whether it has the ability and intent to hold the investment until the carrying amount is fully recovered. The evaluation of an investment in a joint venture for potential impairment requires us to exercise significant judgment and to make certain assumptions.  The use of different judgments and assumptions could result in different conclusions.

53

Investment in Notes Receivable
Notes receivable consist of loans acquired by us, which are secured by real estate properties. Notes receivable are recorded at stated principal amounts net of any discount or premium and deferred loan origination costs or fees. The related discounts or premiums are accreted or amortized over the life of the related note receivable. We defer certain loan origination and commitment fees and amortize them as an adjustment of yield over the term of the related note receivable. The related accretion of discounts and/or amortization of premiums and origination costs are recorded in interest income on notes receivable. We evaluate the collectability of both interest and principal on each note receivable to determine whether it is collectible, primarily through the evaluation of credit quality indicators such as underlying collateral and payment history. A note receivable is considered to be impaired, when based upon current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. If a note receivable is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the note receivable’s effective interest rate or to the value of the underlying collateral if the note receivable is collateral dependent. Interest income on performing notes receivable is accrued as earned. Interest income on impaired notes receivable is recognized on a cash basis. Evaluating notes receivable for potential impairment can require our management to exercise significant judgments.
Investment in Marketable Securities
Investments in marketable securities consist of investments in CMBS, including those pledged as collateral. We classify our investments as available-for-sale as we intend to hold our investments until maturity, however we may sell them prior to their maturity. These investments are carried at estimated fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss). We use estimated non-binding quoted market prices from the trading desks of financial institutions that are dealers in such securities, where available, for similar CMBS tranches that actively participate in the CMBS market and industry benchmarks, such as Trepp’s CMBS Analytics, where applicable. Market conditions, such as interest rates, liquidity, trading activity and credit spreads may cause significant variability to the received quotes. If we are unable to obtain quotes or believe the quotes received are inaccurate, we would estimate fair value using internal models that primarily consider the Trepp’s CMBS Analytics, expected cash flows, known and expected defaults and rating agency reports. Changes in market conditions could result in a significant increase or decrease in the recorded amount of the securities. Significant judgment is involved in valuations and different judgments and assumptions used in our valuation could result in alternative valuations. If there are significant disruptions to the financial markets, our estimates of fair value may have significant volatility. Upon the sale of a security, the realized net gain or loss is computed on a specific identification basis.
We monitor our available-for-sale securities for impairments. A loss is recognized when we determine that a decline in the estimated fair value of a security below its amortized cost is other-than-temporary. We consider many factors in determining whether the impairment of a security is deemed to be other-than-temporary, including, but not limited to, the length of time the security has had a decline in estimated fair value below its amortized cost, the amount of the unrealized loss, the intent and ability of us to hold the security for a period of time sufficient for a recovery in value, recent events specific to the issuer or industry, external credit ratings and recent changes in such ratings. The analysis of determining whether the impairment of a security is deemed to be other-than-temporary requires significant judgments and assumptions. The use of alternative judgments and assumptions could result in a different conclusion.
Accretion of discounts on the CMBS is recognized based on the effective yield method and is recorded in the accompanying consolidated statements of operations in interest income on marketable securities. The effective yield on these CMBS is based on the projected cash flows from each security, which are estimated based on our observation of current information and events and include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. We review and, if appropriate, make adjustments to our cash flow projections based on input and analysis received from external sources, internal models, and our judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, and prepayments of principal. Therefore actual maturities of the securities may be shorter than stated contractual maturities.

54

Income Taxes
We qualified and elected to be taxed as a REIT for federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code. We generally are not subject to federal corporate income tax to the extent we distribute our taxable income to our stockholders, and so long as we, among other things, distribute at least 90% of our annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains). REITs are subject to a number of other organizational and operational requirements. Even if we maintain our qualification for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and federal income and excise taxes on our undistributed income.
Derivative Instruments and Hedging Activities
We account for our derivative instruments, including certain derivative instruments embedded in other contracts, at fair value. Accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative instrument and the designation of the derivative instrument. The change in fair value of the effective portion of the derivative instrument that is designated as a hedge is recorded as other comprehensive income (loss). The changes in fair value for derivative instruments that are not designated as a hedge or that do not meet the hedge accounting criteria are recorded as a gain or loss to operations. Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities, and the determination of hedge effectiveness can involve significant estimates. If we incorrectly estimate the fair value of derivatives and hedge effectiveness, our net income could be impacted.
Results of Operations
Our results of operations are influenced by the timing of acquisitions and the operating performance of our real estate investments. The following table shows the property statistics of our real estate assets, including the Consolidated Joint Ventures, as of December 31, 2012, 2011 and 2010:
 
Year Ended December 31,
 
2012
 
2011
 
2010
Number of commercial properties (1)
1,014

 
693

 
449

Approximate rentable square feet (2)
43.1 million

 
32.3 million

 
17.7 million

Percentage of rentable square feet leased
99
%
 
99
%
 
99
%
________________
(1)
Excludes properties owned through the Unconsolidated Joint Ventures.
(2)
Including square feet of the buildings on land that are subject to ground leases.
The following table summarizes our real estate investment activity, including the Consolidated Joint Ventures, during the years ended December 31, 2012, 2011 and 2010: 
  
Year Ended December 31,
 
 
2012
 
 
2011
 
 
2010
Commercial properties acquired (1) 
 
349

 
 
244

 
 
316

Approximate purchase price of acquired properties
$
2.0 billion

 
$
2.2 billion

 
$
2.3 billion

Approximate rentable square feet (2)
 
12.2 million

 
 
14.4 million

 
 
13.0 million

________________
(1)
Excludes properties owned through the Unconsolidated Joint Ventures.
(2)
Including square feet of the buildings on land that are subject to ground leases.
As shown in the tables above, we and our Consolidated Joint Ventures owned 1,014 commercial properties as of December 31, 2012, compared to 693 commercial properties as of December 31, 2011. Accordingly, our results of operations for the year ended December 31, 2012, as compared to the year ended December 31, 2011, reflect significant increases in most categories.

55

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Revenue. Revenue increased $218.9 million, or 68%, to $542.9 million for the year ended December 31, 2012, compared to $324.0 million for the year ended December 31, 2011. Our revenue consisted primarily of rental and other property income from net leased commercial properties, which accounted for 87% and 91% of total revenues during the years ended December 31, 2012 and 2011, respectively.
Rental and other property income increased $176.8 million, or 60%, to $471.3 million for the year ended December 31, 2012, compared to $294.5 million for the year ended December 31, 2011. The increase was primarily due to the acquisition of 349 rental income-producing properties subsequent to December 31, 2011. We also pay certain operating expenses subject to reimbursement by our tenants, which resulted in $44.5 million of tenant reimbursement income during the year ended December 31, 2012, compared to $21.6 million during the year ended December 31, 2011.
Interest income on notes receivable increased $1.1 million, or 20%, to $6.6 million for the year ended December 31, 2012, compared to $5.5 million for the year ended December 31, 2011. The increase was due to the interest income earned on the $25.0 million note acquired during the year ended December 31, 2012, as discussed in Note 7 to our consolidated financial statements in this Annual Report on Form 10-K.
In addition, we recorded interest income on marketable securities of $20.5 million for the year ended December 31, 2012, compared to $2.4 million for the year ended December 31, 2011. The increase is due to the acquisition of 24 additional marketable securities subsequent to December 31, 2011.
General and Administrative Expenses. General and administrative expenses increased $4.7 million, or 46%, to $14.9 million for the year ended December 31, 2012, compared to $10.2 million for the year ended December 31, 2011. The increase was primarily due to increased trustee fees as a result of an increase in the number of stockholders of record and an increase in insurance and operating expense reimbursements as a result of the acquisition of 349 rental income-producing properties subsequent to December 31, 2011. The primary general and administrative expense items are trustee fees, operating expense reimbursements to our advisor, state franchise and income taxes and accounting, legal and professional fees.
Property Operating Expenses. Property operating expenses increased $25.3 million, or 105%, to $49.3 million for the year ended December 31, 2012, compared to $24.0 million for the year ended December 31, 2011. The increase was primarily due to increased property taxes, repairs and maintenance and property related insurance expenses relating to the acquisition of 349 rental income-producing properties subsequent to December 31, 2011. In addition, the increase was due to the ownership of more properties during the year ended December 31, 2012 than in the year ended December 31, 2011, for which we initially pay certain operating expenses and are reimbursed by the tenant in accordance with the respective lease agreements. The primary property operating expense items are property taxes, repairs and maintenance and property related insurance.
Property and Asset Management Expenses. Pursuant to the advisory agreement with our advisor, we are required to pay to our advisor a monthly asset management fee equal to one-twelfth of 0.50% of the average invested assets. Additionally, we may be required to reimburse expenses incurred by our advisor in providing asset management services, subject to limitations as set forth in the advisory agreement. Pursuant to the property management agreement with our affiliated property manager, we are required to pay to our property manager a property management fee in an amount up to 2% of gross revenues from each of our single tenant properties and up to 4% of gross revenues from each of our multi-tenant properties. We may also be required to reimburse our property manager expenses it incurred relating to managing or leasing the properties, subject to limitations as set forth in the advisory agreement.
Property and asset management expenses increased $19.2 million, or 71%, to $46.4 million for the year ended December 31, 2012, compared to $27.2 million for the year ended December 31, 2011. Property management fees increased $5.4 million, or 73%, to $12.8 million for the year ended December 31, 2012 from $7.4 million for the year ended December 31, 2011. The increase in property management fees was primarily due to an increase in cash receipts related to an increase in rental and other property income for the year ended December 31, 2012, from the 349 properties acquired subsequent to December 31, 2011.
Asset management fees increased $12.8 million, or 73%, to $30.4 million for the year ended December 31, 2012, from $17.6 million for the year ended December 31, 2011. The increase in asset management fees was primarily due to an increase in the average invested assets to $6.3 billion for the year ended December 31, 2012, from $4.2 billion for the year ended December 31, 2011.

56

In addition, during the year ended December 31, 2012, we recorded $3.2 million related to reimbursement of expenses incurred by our advisor in performing property and asset management services, compared to $2.2 million for the year ended December 31, 2011. The increase was primarily due to expenses incurred by our advisor related to management of 349 additional rental income-producing properties acquired subsequent to December 31, 2011.
Acquisition Related Expenses. Acquisition related expenses increased $4.5 million, or 8%, to $63.9 million for the year ended December 31, 2012, compared to $59.4 million for the year ended December 31, 2011. The increase was primarily due to expenses related to the Merger. We recorded $3.5 million of Merger related expenses for the year ended December 31, 2012, as discussed in Note 2 to our consolidated financial statements in this Annual Report on Form 10-K. No Merger related expenses were recorded during the year ended December 31, 2011. Pursuant to the advisory agreement with our advisor, we pay an acquisition fee to our advisor of 2% of the contract purchase price of each property or asset acquired. We also reimburse our advisor for acquisition expenses incurred in the process of acquiring property or in the origination or acquisition of a loan other than for personnel costs for which our advisor receives acquisition fees.
Depreciation and Amortization Expenses. Depreciation and amortization expenses increased $65.3 million, or 69%, to $159.6 million for the year ended December 31, 2012, compared to $94.3 million for the year ended December 31, 2011. The increase was primarily due to an increase in the average invested assets to $6.3 billion for the year ended December 31, 2012, from $4.2 billion for the year ended December 31, 2011.
Equity in Income of Unconsolidated Joint Ventures. Equity in income of Unconsolidated Joint Ventures increased $708,000, or 48%, to $2.2 million for the year ended December 31, 2012, compared to $1.5 million for the year ended December 31, 2011. The increase is primarily due to the acquisition of five of the Unconsolidated Joint Ventures subsequent to December 31, 2011.
Other Income. Other income, which includes interest income on money market accounts, increased $4.1 million to $4.4 million during the year ended December 31, 2012, compared to $344,000 during the year ended December 31, 2011. The increase was primarily due to non-recurring net proceeds of $2.7 million received as a result of a seller terminating a purchase agreement. In addition, we received net proceeds of $664,000 as a result of the sale and condemnation of two land parcels during the year ended December 31, 2012.
Gain on Sale of Marketable Securities. During the year ended December 31, 2012, we sold six CMBS and half of our investment in two CMBS for a for aggregate proceeds of $63.4 million and realized a gain on the sale of $12.5 million, of which $8.9 million had previously been recorded in other comprehensive income (loss). We did not sell any CMBS during the year ended December 31, 2011.
Interest Expense. Interest expense increased $61.1 million, or 77%, to $140.1 million for the year ended December 31, 2012, compared to $79.0 million during the year ended December 31, 2011. The increase was due to an increase in the average aggregate amount of notes payable and other borrowings outstanding to $2.8 billion during the year ended December 31, 2012, from $1.7 billion for the year ended December 31, 2011. In addition, the increase was due to a $9.7 million loss, of which $9.3 million had been previously recognized in accumulated other comprehensive income (loss), on a terminated interest rate swap as it related to one of the properties sold during the year ended December 31, 2012. See Note 10 to our consolidated financial statements in this Annual Report on 10-K for further information.
Income from Discontinued Operations. Income from discontinued operations was $7.1 million for the year ended December 31, 2012, compared to $14.1 million for the year ended December 31, 2011. The decrease was due to the sale of properties throughout 2012, whereas a full year of operating results for these properties were recorded during the year ended December 31, 2011.
Gain on Sale of Real Estate Assets. During the year ended December 31, 2012, we sold 28 properties for an aggregate gross sales price of $573.8 million and recorded a gain on the sale of $108.5 million. We did not sell any properties during the year ended December 31, 2011.
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Revenue. Revenue increased $205.8 million, or 174%, to $324.0 million for the year ended December 31, 2011, compared to $118.2 million for the year ended December 31, 2010. Our revenue consisted primarily of rental and other property income from net leased commercial properties, which accounted for 91% and 92% of total revenues during the years ended December 31, 2011 and December 31, 2010, respectively.

57

Rental and other property income increased $186.0 million, or 171%, to $294.5 million for the year ended December 31, 2011, compared to $108.5 million for the year ended December 31, 2010. The increase was primarily due to the acquisition of 244 rental income-producing properties subsequent to December 31, 2010. We also pay certain operating expenses subject to reimbursement by our tenants, which resulted in $21.6 million of tenant reimbursement income during the year ended December 31, 2011, compared to $6.1 million during the year ended December 31, 2011.
Interest income on notes receivable increased $1.9 million, or 53%, to $5.5 million for the year ended December 31, 2011, compared to $3.6 million for the year ended December 31, 2010, as we acquired two notes receivable on April 30, 2010. In addition, we recorded interest income on marketable securities of $2.4 million for the year ended December 31, 2011 due to the acquisition of 11 CMBS for $112.0 million. During the year ended December 31, 2010 we did not own any marketable securities.
General and Administrative Expenses. General and administrative expenses increased $4.3 million, or 73%, to $10.2 million for the year ended December 31, 2011, compared to $5.9 million for the year ended December 31, 2010. The increase was primarily due increased trustee fees as a result of an increase in the number of stockholders of record and an increase in operating expense reimbursements as a result of the acquisition of 244 rental income-producing properties subsequent to December 31, 2010. The primary general and administrative expense items are operating expense reimbursements to our advisor, escrow and trustee fees, accounting, legal and professional fees, state franchise and income taxes and unused credit facility fees.
Property Operating Expenses. Property operating expenses increased $17.1 million or 248%, to $24.0 million for the year ended December 31, 2011, compared to $6.9 million for the year ended December 31, 2010. The increase was primarily due to increased property taxes, repairs and maintenance and insurance expenses relating to the acquisition of 244 rental income-producing properties subsequent to December 31, 2010. The primary property operating expense items are property taxes, repairs and maintenance and property related insurance.
Property and Asset Management Expenses. Pursuant to the advisory agreement with our advisor, we are required to pay to our advisor a monthly asset management fee equal to one-twelfth of 0.50% of the average invested assets. Additionally, we may be required to reimburse expenses incurred by our advisor in providing asset management services, subject to limitations as set forth in the advisory agreement. Pursuant to the property management agreement with our affiliated property manager, we are required to pay to our property manager a property management fee in an amount up to 2% of gross revenues from each of our single tenant properties and up to 4% of gross revenues from each of our multi-tenant properties. We may also be required to reimburse our property manager expenses it incurred relating to managing or leasing the properties, subject to limitations as set forth in the advisory agreement.
Property and asset management expenses increased $16.8 million, or 162%, to $27.2 million for the year ended December 31, 2011, compared to $10.4 million for the year ended December 31, 2010. Property management fees increased $4.9 million, or 196%, to $7.4 million for the year ended December 31, 2011 from $2.5 million for the year ended December 31, 2010. The increase in property management fees was primarily due to an increase in cash receipts related to an increase in rental and other property income for the year ended December 31, 2011 from the 244 properties acquired subsequent to December 31, 2010.
Asset management fees increased $11.2 million, or 175%, to $17.6 million for the year ended December 31, 2011, from $6.4 million for the year ended December 31, 2010. The increase in asset management fees was primarily due to an increase in the average invested assets to $4.2 billion for the year ended December 31, 2011, from $1.9 billion for the year ended December 31, 2010.
In addition, during the year ended December 31, 2011, we recorded $2.2 million related to reimbursement of expenses incurred by our advisor in performing property and asset management services, compared to $1.4 million for the year ended December 31, 2010. The increase was primarily due to expenses incurred by our advisor related to management of 244 additional rental income-producing properties acquired subsequent to December 31, 2010.
Acquisition Related Expenses. Acquisition related expenses remained relatively constant, increasing $737,000, or 1%, to $59.4 million for the year ended December 31, 2011, compared to $58.7 million for the year ended December 31, 2010, as we acquired a comparable amount of real estate in each of the years ended December 31, 2011 and 2010. Of the total acquisition related expenses incurred during the year ended December 31, 2010, $8.6 million were incurred in the acquisition of certain properties sold during the year ended December 31, 2012 and are therefore presented in discontinued operations for the year ended December 31, 2010. Pursuant to the advisory agreement with our advisor, we pay an acquisition fee to our advisor of 2% of the contract purchase price of each property or asset acquired. We also reimburse our advisor for acquisition expenses incurred in the process of acquiring property or in the origination or acquisition of a loan, other than for personnel costs for which our advisor receives acquisition fees.

58

Depreciation and Amortization Expenses. Depreciation and amortization expenses increased $61.8 million, or 190%, to $94.3 million for the year ended December 31, 2011, compared to $32.5 million for the year ended December 31, 2010. The increase was primarily due to an increase in the average invested assets to $4.2 billion for the year ended December 31, 2011, from $1.9 billion for the year ended December 31, 2010.
Equity in Income (Loss) of Unconsolidated Joint Ventures. We recorded income of $1.5 million for the year ended December 31, 2011, which represented our share of the Unconsolidated Joint Ventures’ net income. During the year ended December 31, 2010, we recorded our share of one of the Unconsolidated Joint Ventures’ net loss of $206,000. The net loss was primarily due to acquisition related expenses.
Other Income. Other income, which includes interest income on money market accounts, decreased $933,000, or 73%, to $344,000 for the year ended December 31, 2011, compared to $1.3 million for the year ended December 31, 2010. The decrease was primarily due to lower average uninvested cash of $163.1 million during the year ended December 31, 2011, as compared to $194.3 million during the year ended December 31, 2010, primarily as a result of acquiring 244 rental income-producing properties acquired subsequent to December 31, 2010.
Interest Expense. Interest expense increased $56.0 million, or 243%, to $79.0 million for the year ended December 31, 2011, compared to $23.0 million during the year ended December 31, 2010. The increase was primarily due to an increase in the average aggregate amount of notes payable and other borrowings outstanding to $1.7 billion during the year ended December 31, 2011, from $595.3 million for the year ended December 31, 2010.
Income from Discontinued Operations. Income from discontinued operations was $14.1 million for the year ended December 31, 2011, compared to $2.8 million for the year ended December 31, 2010. Five of the properties sold during the year ended December 31, 2012 were originally purchased during the year ended December 31, 2010 for an aggregate purchase price of $376.8 million. Therefore, the acquisition related expenses for these properties were recognized during the year ended December 31, 2010.
Portfolio Information
Real Estate Portfolio
As of December 31, 2012, we and our Consolidated Joint Ventures owned 1,014 properties located in 47 states, the gross rentable space of which was 99% leased with an average lease term remaining of 12.7 years.
As of December 31, 2012, our five highest tenant concentrations, including the Consolidated Joint Ventures and based on annualized gross rental revenue, were as follows:
 
 
 
 
 
 
2012 Gross
 
Percentage of
 
 
Total
 
 
 
Annualized
 
2012 Gross
 
 
Number
 
Leased
 
Rental Revenue
 
Annualized
Tenant
 
of Leases(1)
 
Square Feet (2)
 
(in thousands)
 
Rental Revenue
Walgreens - drugstore
 
76

 
1,117,766

 
$
28,421

 
5
%
Albertson’s - grocery
 
34

 
1,973,485

 
24,075

 
4
%
PetSmart - pet supplies
 
41

 
1,281,846

 
23,152

 
4
%
CVS - drugstore
 
58

 
914,799

 
22,128

 
4
%
BJ’s Wholesale Club - warehouse club
 
3

 
2,229,933

 
19,106

 
3
%
 
 
212

 
7,517,829

 
$
116,882

 
20
%
________________
(1)
Excludes properties owned through the Unconsolidated Joint Ventures.
(2)
Including square feet of the buildings on land that are subject to ground leases.

59

As of December 31, 2012, our five highest tenant industry concentrations, including the Consolidated Joint Ventures and based on annualized gross rental revenue, were as follows:
 
 
 
 
 
 
2012 Gross
 
Percentage of
 
 
Total
 
 
 
Annualized
 
2012 Gross
 
 
Number
 
Leased
 
Rental Revenue
 
Annualized
Industry
 
of Leases(1)
 
Square Feet (2)
 
(in thousands)
 
Rental Revenue
Restaurant
 
324

 
2,065,803

 
$
58,077

 
10
%
Grocery
 
72

 
3,904,080

 
50,750

 
9
%
Drugstore
 
134

 
2,032,565

 
50,549

 
9
%
Discount store
 
220

 
4,314,042

 
42,957

 
8
%
Home and garden
 
66

 
3,874,610

 
30,553

 
5
%
 
 
816

 
16,191,100

 
$
232,886

 
41
%
________________
(1)
Excludes properties owned through the Unconsolidated Joint Ventures.
(2)
Including square feet of the buildings on land that are subject to ground leases.
As of December 31, 2012, our five highest geographic concentrations, including the Consolidated Joint Ventures and based on annualized gross rental revenue, were as follows:
 
 
 
 
 
 
2012 Gross
 
Percentage of
 
 
Total
 
 
 
Annualized
 
2012 Gross
 
 
Number of
 
Leased
 
Rental Revenue
 
Annualized
Location
 
Properties (1)
 
Square Feet (2)
 
(in thousands)
 
Rental Revenue
Texas
 
190

 
6,090,708

 
$
95,231

 
17
%
Arizona
 
41

 
2,979,354

 
49,148

 
9
%
California
 
21

 
2,865,634

 
40,209

 
7
%
Florida
 
81

 
3,299,153

 
39,956

 
7
%
Illinois
 
46

 
1,508,238

 
29,214

 
5
%
 
 
379

 
16,743,087

 
$
253,758

 
45
%
________________
(1)
Excludes properties owned through the Unconsolidated Joint Ventures.
(2)
Including square feet of the buildings on land that are subject to ground leases.
For more information on diversification and statistics of our wholly-owned real estate assets, see “Item 2—Properties” above.
Notes Receivable and CMBS Portfolio
As of December 31, 2012, we owned three notes receivable with an aggregate book value of $90.4 million. In addition, as of December 31, 2012, we owned 29 CMBS, with an estimated aggregate fair value of $317.2 million.
Investment in Unconsolidated Joint Ventures
As of December 31, 2012, through seven unconsolidated joint venture arrangements, we had interests in 12 properties comprising 2.3 million gross rentable square feet of commercial space including square feet of buildings on land that are subject to ground leases. As of December 31, 2012 our aggregate investment in the Unconsolidated Joint Ventures was $96.8 million. For more information on our joint ventures see Note 5 to our consolidated financial statements included in this Annual Report on Form 10-K.

60

Funds From Operations and Modified Funds From Operations
Funds From Operations (“FFO”) is a non-GAAP financial performance measure defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and widely recognized by investors and analysts as one measure of operating performance of a real estate company. The FFO calculation excludes items such as real estate depreciation and amortization, gains and losses on the sale of depreciable real estate and impairments of depreciable real estate. Depreciation and amortization as applied in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, it is management’s view, and we believe the view of many industry investors and analysts, that the presentation of operating results for real estate companies by using the historical cost accounting method alone is insufficient. In addition, FFO excludes gains and losses from the sale of depreciable real estate and impairment charges on depreciable real estate, which we believe provides management and investors with a helpful additional measure of the performance of our real estate portfolio, as it allows for comparisons, year to year, that reflect the impact on operations from trends in items such as occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs. We compute FFO in accordance with NAREIT’s definition.
In addition to FFO, we use Modified Funds From Operations (“MFFO”) as a non-GAAP supplemental financial performance measure to evaluate the operating performance of our real estate portfolio. MFFO, as defined by our company, excludes from FFO acquisition related costs, which are required to be expensed in accordance with GAAP. In evaluating the performance of our portfolio over time, management employs business models and analyses that differentiate the costs to acquire investments from the investments’ revenues and expenses. Management believes that excluding acquisition related costs from MFFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time, including after the Company ceases to acquire properties on a frequent and regular basis. MFFO also allows for a comparison of the performance of our portfolio with other REITs that are not currently engaging in acquisitions and mergers, as well as a comparison of our performance with that of other non-traded REITs, as MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and we believe often used by analysts and investors for comparison purposes.
For all of these reasons, we believe FFO and MFFO, in addition to net income and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful in understanding the various ways in which our management evaluates the performance of our real estate portfolio over time. However, not all REITs calculate FFO and MFFO the same way, so comparisons with other REITs may not be meaningful. FFO and MFFO should not be considered as alternatives to net income or to cash flows from operating activities, and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs.
MFFO may provide investors with a useful indication of our future performance, particularly after our acquisition stage, and of the sustainability of our current distribution policy. However, because MFFO excludes acquisition expenses, which are an important component in an analysis of the historical performance of a property, MFFO should not be construed as a historic performance measure. Neither the SEC, NAREIT, nor any other regulatory body has evaluated the acceptability of the exclusions contemplated to adjust FFO in order to calculate MFFO and its use as a non-GAAP financial performance measure.
Our calculation of FFO and MFFO, and reconciliation to net income (loss), which is the most directly comparable GAAP financial measure, is presented in the table below for the years ended December 31, 2012, 2011 and 2010 (in thousands). FFO and MFFO are influenced by the timing of acquisitions and the operating performance of our real estate investments.

61

 
Year Ended December 31,
 
2012
 
2011
 
2010
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY
$
203,338

 
$
45,296

 
$
(6,293
)
Depreciation of real estate assets
103,719

 
61,198

 
20,460

Amortization of lease related costs
55,890

 
33,057

 
12,007

Depreciation and amortization of real estate assets from discontinued operations
8,489

 
12,066

 
6,861

Depreciation and amortization of real estate assets in unconsolidated joint ventures
4,809

 
1,803

 
967

Gain on sale and condemnation of real estate assets
(109,121
)
 
—

 
(34
)
Funds from operations (FFO)
267,124

 
153,420

 
33,968

Acquisition related expenses
63,892

 
59,433

 
50,096

Acquisition related expenses in unconsolidated joint ventures and discontinued operations
—

 
—

 
9,356

Modified funds from operations (MFFO)
$
331,016

 
$
212,853

 
$
93,420

Set forth below is additional information that may be helpful in assessing our operating results:
•
In order to recognize revenues on a straight-line basis over the terms of the respective leases, we recognized additional revenue by straight-lining rental revenue of $33.2 million, $24.7 million and $13.6 million during the years ended December 31, 2012, 2011 and 2010, respectively. In addition, related to our interest in the Unconsolidated Joint Ventures, straight-line revenue of $2.9 million, $85,000, and $55,000 for the years ended December 31, 2012, 2011 and 2010, respectively is included in equity in income (loss) of unconsolidated joint ventures on the consolidated statements of operations.
•
Amortization of deferred financing costs and amortization of fair value adjustments of mortgage notes assumed totaled $14.2 million, $8.5 million and $2.8 million during the years ended December 31, 2012, 2011 and 2010, respectively. In addition, related to our interest in the Unconsolidated Joint Ventures, amortization of deferred financing costs of $244,000, $52,000 and $30,000 for the years ended December 31, 2012, 2011 and 2010, respectively, is included in equity in income (loss) of unconsolidated joint ventures on the consolidated statements of operations.
•
During the year ended December 31, 2012, a purchase agreement was terminated and the seller paid us a breakage fee and reimbursed us for certain underwriting expenses paid. We recorded these proceeds, net of underwriting expenses and advisor reimbursements, of $2.7 million as other income.
•
During the year ended December 31, 2012, we recorded a $9.7 million loss, of which $9.3 million had previously been recorded in accumulated other comprehensive income (loss), on a terminated interest rate swap as it related to one of the properties sold.
•
During the year ended December 31, 2012, we sold six CMBS and half of our investment in two CMBS for aggregate proceeds of $63.4 million and realized a gain on the sale of $12.5 million, of which $8.9 million had previously been recorded in other comprehensive income (loss). No sales of CMBS occurred during the years ended December 31, 2011 and 2010.
Distributions
Our board of directors authorized a daily distribution, based on 366 days in the calendar year, of $0.001776144 per share (which equates to 6.50% on an annualized basis calculated at the current rate, assuming a $10.00 per share purchase price) for stockholders of record as of the close of business on each day of the period, commencing on January 1, 2012 and ending on December 31, 2012. In addition, our board of directors authorized a daily distribution, based on 365 days in the calendar year, of $0.001781016 per share (which equates to 6.50% on an annualized basis calculated at the current rate, assuming a $10.00 per share purchase price) for stockholders of record as of the close of business on each day of the period, commencing on January 1, 2013 and ending on March 31, 2013. Subsequent to December 31, 2012, our board of directors authorized a daily distribution, based on 365 days in the calendar year (each a “Daily Distribution”), to stockholders of record as of the close of business on each day of the period commencing on April 1, 2013 and ending on June 30, 2013 (each, a “Record Date”), with each Daily Distribution payable (i) as of each Record Date prior to the closing date of the consummation of the Merger in the amount of $0.001781016 per share (which equates to 6.50% on an annualized basis calculated at the current rate, assuming a

62

$10.00 per share purchase price) and (ii) as of each Record Date on or after the closing date of the consummation of the Merger in the amount of $0.0019179 per share (which equates to 7.00% on an annualized basis calculated at the current rate, assuming a $10.00 per share purchase price).
During the years ended December 31, 2012 and 2011, we paid distributions of $295.7 million and $194.9 million, respectively, including $169.1 million and $110.1 million, respectively, through the issuance of shares pursuant to our DRIP. Our 2012 distributions were funded by net cash provided by operating activities of $242.5 million, or 82%, distributions received in excess of income from the Unconsolidated Joint Ventures of $5.1 million, or 2%, and proceeds from the issuance of common stock of $48.1 million, or 16%. Our 2011 distributions were funded by net cash provided by operating activities of $145.7 million, or 75%, return of capital from the Unconsolidated Joint Ventures of $1.1 million, or 1%, and proceeds from the issuance of common stock of $48.1 million, or 24%. Net cash provided by operating activities for the years ended December 31, 2012 and 2011, reflects a reduction for real estate acquisition related costs incurred and expensed of $63.9 million and $59.4 million, respectively, in accordance with GAAP.  We treat our real estate acquisition expenses as funded by proceeds from the offering of our shares, including proceeds from the DRIP Offering. Therefore, for consistency, proceeds from the issuance of common stock for the years ended December 31, 2012 and 2011 have been reported as a source of distributions to the extent that acquisition expenses have reduced net cash flows from operating activities.
Share Redemptions
Our share redemption program provides that we will not redeem in excess of 5% of the weighted average number of shares outstanding during the trailing twelve months prior to the end of the fiscal quarter for which the redemptions are being paid (the “Trailing Twelve-month Cap”); provided, however, that while shares subject to a redemption requested upon the death of a stockholder will be included in calculating the maximum number of shares that may be redeemed, such shares will not be subject to the Trailing Twelve-month Cap. In addition, all redemptions, including those upon death or qualifying disability, are limited to those that can be funded with cumulative net proceeds from the sale of shares through our DRIP. The redemption price per share (other than shares pursuant to our DRIP) will depend on the price paid for the shares (until such time as our board of directors has determined a reasonable estimate of the value of our shares) and the length of time the stockholder has held such shares. The redemption price for shares purchased pursuant to our DRIP will be the amount paid for such shares or, after our board of directors has determined a reasonable estimate of the value of our shares, the most recent estimated value of each share. During the year ended December 31, 2012, we received valid redemption requests relating to approximately 7.0 million shares, which we redeemed in full for $68.6 million (an average of $9.80 per share). A valid redemption request is one that complies with the applicable requirements and guidelines of our current share redemption program. We have funded and intend to continue funding share redemptions with proceeds of our DRIP Offering. Subsequent to December 31, 2012, we redeemed approximately 2.8 million shares for a total of $27.8 million, or an average price per share of $9.80.
In addition to the caps discussed above, the redemptions are limited quarterly to 1.25% of the weighted average number of shares outstanding during the trailing twelve-month period ending on the last day of the fiscal quarter. In addition, the funding for redemptions each quarter generally will be limited to the net proceeds we receive from the sale of shares in the respective quarter under our DRIP. The share redemption program further provides that while shares subject to redemption requested upon the death of a stockholder will be included in calculating the maximum number of shares that may be redeemed, such shares will not be subject to the quarterly percentage caps. Our management may waive these quarterly caps in its sole discretion, subject to the Trailing Twelve-month Cap.
See discussion in Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Share Redemption Program.”
Liquidity and Capital Resources
General
As of December 31, 2012, we had cash and cash equivalents of $192.5 million and available borrowings of $89.8 million under our Credit Facility. Additionally, as of December 31, 2012, we had unencumbered properties with a gross book value of $2.5 billion, including $1.4 billion of assets that are part of the Credit Facility’s unencumbered borrowing base (the “Borrowing Base Assets”), which may be used as collateral to secure additional financing in future periods or as additional collateral to facilitate the refinancing of current mortgage debt as it becomes due, subject to certain covenants and leverage and borrowing base restrictions related to our Credit Facility; however, the use of any Borrowing Base Assets as collateral would reduce the available borrowings under our Credit Facility.

63

Short-term Liquidity and Capital Resources
On a short-term basis, our principal demands for funds will be for operating expenses and expenses related to the Merger, distributions and redemptions to stockholders and interest and principal on current and any future debt financings. We expect to meet our short-term liquidity requirements through cash flows provided by operations and proceeds from the DRIP Offering. Operating cash flows are expected to increase as additional properties are added to our portfolio. As of December 31, 2012, we and the Consolidated Joint Ventures had a total of $64.3 million of fixed rate debt and construction facilities maturing within the next 12 months. In addition, we have repurchase agreements of $100.1 million maturing within the next 12 months that we may elect to renew for periods of 90 days until the respective CMBS mature. The CMBS have a weighted average remaining term of 9.5 years. If we are unable to extend, finance or refinance the amounts maturing, we expect to pay down any remaining amounts through a combination of the use of available cash, cash provided by property operations, available borrowings on our Credit Facility, borrowings on our unencumbered properties and/or proceeds from our DRIP Offering. We believe that the resources stated above will be sufficient to satisfy our operating requirements for the foreseeable future, and we do not anticipate a need to raise funds from sources other than those described above within the next 12 months.
Long-term Liquidity and Capital Resources
On a long-term basis, our principal demands for funds will be for the acquisition of real estate and real estate-related investments and the payment of acquisition related expenses, operating expenses, distributions and redemptions to stockholders and interest and principal on any future debt financings. Generally, we expect to meet cash needs for items other than acquisitions and acquisition related expenses and debt maturities from our cash flow from operations, and we expect to meet cash needs for acquisitions and debt maturities from the net proceeds from the DRIP Offering and from secured or unsecured borrowings on our current unencumbered properties and future properties, refinancing of current debt, borrowings on our Credit Facility and the strategic sale of real estate and related assets.
We expect that substantially all cash flows from operations will be used to pay distributions to our stockholders after certain capital expenditures, including tenant improvements and leasing commissions, are paid; however, we may use other sources to fund distributions as necessary, including the proceeds from the DRIP Offering, borrowing on the Credit Facility and/or future borrowings on our unencumbered assets. During the year ended December 31, 2012, we funded distributions to our stockholders with cash flows from operations, distributions received in excess of income from the Unconsolidated Joint Ventures and proceeds from the issuance of common stock as discussed above in the section captioned “Distributions.” The Credit Facility and certain notes payable contain customary affirmative, negative and financial covenants, including requirements for minimum net worth, debt service coverage ratios, and leverage ratios. These covenants may limit our ability to incur additional debt and make borrowings on the Credit Facility.
As of December 31, 2012, we had issued approximately 492.1 million shares of our common stock in the Offerings resulting in gross proceeds of $4.9 billion. As of December 31, 2012, we had redeemed a total of approximately 12.6 million shares of common stock for a cost of $122.4 million, at an average price per share of $9.75.
As of December 31, 2012, we and the Consolidated Joint Ventures had $3.3 billion of debt outstanding. See Note 11 to our consolidated financial statements in this Annual Report on Form 10-K for certain terms of the debt outstanding. Additionally, the ratio of debt to gross real estate and related assets net of gross intangible lease liabilities, as of December 31, 2012, was 45% and the weighted average years to maturity was 5.3 years.

64

Our contractual obligations as of December 31, 2012, were as follows (in thousands):
 
Payments due by period (1) (2) (3)
 
Total
 
Less Than 1
Year
 
1-3 Years
 
3-5 Years
 
More Than 5
Years (9)
Principal payments - fixed rate debt(4)
$
2,312,482

 
$
36,516

 
$
179,986

 
$
316,198

 
$
1,779,782

Interest payments - fixed rate debt
777,796

 
112,562

 
219,993

 
188,881

 
256,360

Principal payments - variable rate debt
84,942

 
—

 
41,200

 
43,742

 
—

Interest payments - variable rate debt(5)
10,261

 
2,662

 
4,416

 
3,183

 
—

Principal payments - construction facilities(6)
27,757

 
27,757

 
—

 
—

 
—

Interest payments - construction facilities
509

 
509

 
—

 
—

 
—

Principal payments - credit facility
767,750

 
—

 
767,750

 
—

 
—

Interest payments - credit facility(7)
43,753

 
26,779

 
16,974

 
—

 
—

Principal payments - repurchase agreements(8)
100,057

 
100,057

 
—

 
—

 
—

Interest payments - repurchase agreements
272

 
272

 
—

 
—

 
—

Total
$
4,125,579

 
$
307,114

 
$
1,230,319

 
$
552,004

 
$
2,036,142

_______________
(1)
The table above does not include amounts due to our advisor or its affiliates pursuant to our advisory agreement because such amounts are not fixed and determinable.
(2)
As of December 31, 2012, we had $465.5 million of variable rate debt fixed through the use of interest rate swaps. We used the rates fixed under our swap agreements to calculate the debt payment obligations in future periods.
(3)
The table above does not include loan amounts associated with certain unconsolidated joint venture arrangements of $195.8 million, of which $10.2 million is recourse to CCPT III OP. These loans mature on various dates ranging from October 2015 to July 2021.
(4)
Principal payment amounts reflect actual payments based on the face amount of notes payable secured by our wholly-owned properties and our Consolidated Joint Ventures. As of December 31, 2012, the fair value adjustment, net of amortization, of mortgage notes assumed was $940,000.
(5)
Rates ranging from 2.46% to 3.46% were used to calculate the variable debt payment obligations in future periods. These were the rates effective as of December 31, 2012.
(6)
The construction facilities have an aggregate commitment, if fully funded, of $47.8 million related to our development project.
(7)
Payment obligations for the Term Loan outstanding under the Credit Facility are based on the respective interest rates of 3.45% and 3.15%, which are the rates fixed under the respective executed swap agreements that had the effect of fixing the variable interest rates per annum through the maturity date of June 2014.
(8)
We may elect to renew the terms under the Repurchase Agreements for periods of 90 days until the respective CMBS, which are held as collateral, mature.
(9)
Assumes we accept the interest rates that one lender may reset on September 1, 2013 and February 1, 2015, respectively, related to mortgage notes payable of $30.0 million and $32.0 million, respectively.
Our charter prohibits us from incurring debt that would cause our borrowings to exceed the greater of 75% of our gross assets, valued at the greater of the aggregate cost (before depreciation and other non-cash reserves) or fair value of all assets owned by us, unless approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report.
We own properties subject to earnout provisions obligating us to pay additional consideration to the seller contingent on the future leasing and occupancy of vacant space at the properties. Assuming all the conditions are satisfied, we estimate that we would be obligated to pay $5.3 million in accordance with the purchase agreements.
As of December 31, 2012, the Company also owned a land parcel, upon which an office building is being developed. Based on budgeted construction costs, the cost to complete the facility is estimated to be $45.8 million in aggregate. The construction will be funded by a construction loan facility totaling $33.8 million. As of December 31, 2012, $19.9 million was outstanding under the construction facility.

65

Cash Flow Analysis
Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Operating Activities. During the year ended December 31, 2012, net cash provided by operating activities increased $96.8 million, or 66%, to $242.5 million, compared to $145.7 million for the year ended December 31, 2011. The change was primarily due to increases in net income of $157.7 million and depreciation and amortization expenses totaling $68.3 million, partially offset by the gain on sale and condemnation of real estate assets of $109.1 million for the year ended December 31, 2012. See “—Results of Operations” for a more complete discussion of the factors impacting our operating performance.
Investing Activities. Net cash used in investing activities decreased $642.0 million, or 27%, to $1.7 billion for the year ended December 31, 2012 compared to $2.4 billion for the year ended December 31, 2011. The decrease is primarily due cash proceeds from the sale and condemnation of real estate assets of $536.1 million and the proceeds from the sale of marketable securities of $63.4 million for the year ended December 31, 2012, combined with the acquisition of 349 commercial properties for an aggregate purchase price of $2.0 billion during the year ended December 31, 2012, compared to 244 commercial properties for an aggregate purchase price of $2.2 billion for the year ended December 31, 2011.
Financing Activities. Net cash provided by financing activities decreased $869.0 million, or 38%, to $1.4 billion for the year ended December 31, 2012, compared to $2.3 billion for the year ended December 31, 2011. The decrease was primarily due to an increase in the repayment of notes payable and other borrowings of $867.7 million combined with a decrease in proceeds from the issuance of common stock of $463.7 million. The decrease was partially offset by an increase in the proceeds from notes payable and other borrowings of $478.0 million for the year ended December 31, 2012.
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Operating Activities. During the year ended December 31, 2011, net cash provided by operating activities increased $109.9 million, or 307%, to $145.7 million, compared to $35.8 for the year ended December 31, 2010. The change was primarily due to increases in net income of $52.4 million and depreciation and amortization expenses, including amortization of deferred financing costs, totaling $74.9 million, partially offset by an increase in the change in rents and tenant receivables of $14.7 million for the year ended December 31, 2011. See “—Results of Operations” for a more complete discussion of the factors impacting our operating performance.
Investing Activities. Net cash used in investing activities remained relatively constant, increasing $9.9 million, or less than 1%, to $2.4 billion for the year ended December 31, 2011 compared to $2.3 billion for the year ended December 31, 2010. During each of the years ended December 31, 2011 and 2010, we acquired real estate, marketable securities and related mortgage assets with an aggregate purchase price of $2.3 billion.
Financing Activities. Net cash provided by financing activities increased $175.1 million, or 8%, to $2.3 billion for the year ended December 31, 2011, compared to $2.1 billion for the year ended December 31, 2010. The change was primarily due to an increase in proceeds from notes payable and other borrowings of $624.8 million, partially offset by a decrease in the issuance of common stock of $145.6 million and increases in repayment of notes payable and other borrowings of $238.3 million, redemptions of common stock of $30.2 million and distributions to investors of $37.3 million.
Election as a REIT
We are taxed as a REIT under the Internal Revenue Code. To maintain our qualification as a REIT, we must continue to meet certain requirements relating to our organization, sources of income, nature of assets, distributions of income to our stockholders and recordkeeping. As a REIT, we generally are not subject to federal income tax on taxable income that we distribute to our stockholders so long as we distribute at least 90% of our annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains).
If we fail to maintain our qualification as a REIT for any reason in a taxable year and applicable relief provisions do not apply, we will be subject to tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates. We will not be able to deduct distributions paid to our stockholders in any year in which we fail to maintain our qualification as a REIT. We also will be disqualified for the four taxable years following the year during which qualification was lost unless we are entitled to relief under specific statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe that we are organized and operate in such a manner as to maintain our qualification as a REIT for federal income tax purposes. No provision for federal income taxes has been made in our accompanying consolidated financial statements. We are subject to certain state and local taxes related to the operations of properties in certain locations, which have been provided for in our accompanying consolidated financial statements.

66

Inflation
We are exposed to inflation risk as income from long-term leases will be the primary source of our cash flows from operations. There are provisions in many of our tenant leases that will protect us from, and mitigate the risk of, the impact of inflation. These provisions include rent steps and clauses enabling us to receive payment of additional rent calculated as a percentage of the tenants’ gross sales above pre-determined thresholds. In addition, most of our leases require the tenant to pay all or a majority of the property’s operating expenses, including real estate taxes, special assessments and sales and use taxes, utilities, insurance and building repairs. However, due to the long-term nature of the leases for real property, such leases may not reset frequently enough to adequately offset the effects of inflation.
Commitments and Contingencies
We may be subject to certain commitments and contingencies with regard to certain transactions. Refer to Note 14 to our consolidated financial statements in this Annual Report on Form 10-K for further explanations.
Related-Party Transactions and Agreements
We have entered into agreements with CR III Advisors and its affiliates, whereby we have paid and may continue to pay certain fees to, or reimburse certain expenses of, CR III Advisors or its affiliates such as acquisition and advisory fees and expenses, financing coordination fees, organization and offering costs, sales commissions, dealer manager fees, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. See Note 2 and Note 15 to our consolidated financial statements in this Annual Report on Form 10-K for a further explanation of the Merger Agreement and various related-party transactions, agreements and fees.
Conflicts of Interest
Affiliates of CR III Advisors act as sponsor, general partner or advisor to various private real estate limited partnerships, and other real estate-related programs, including CCPT I, CCPT II, CCPT IV, CCIT and Cole Income NAV Strategy. As such, there are conflicts of interest where CR III Advisors or its affiliates, while serving in the capacity as sponsor, general partner, key personnel or advisor for other real estate programs sponsored by Cole Real Estate Investments, may be in conflict with us in connection with providing services to other real estate related programs related to property acquisitions, property dispositions, and property management, among others. The compensation arrangements between affiliates of CR III Advisors and these other real estate programs sponsored by Cole Real Estate Investments could influence its advice to us. See Item 1. “Business—Conflicts of Interest” in this Annual Report on Form 10-K.
Subsequent Events
Certain events occurred subsequent to December 31, 2012 through the filing date of this Annual Report on Form 10-K. Refer to Note 21 to our consolidated financial statements in this Annual Report on Form 10-K for further explanation. Such events are:
•
Issuance of shares of common stock in the DRIP Offering;
•
Redemption of shares of common stock;
•
Entry into the Merger Agreement;
•
Entry into employment agreements with key personnel;
•
Legal proceedings;
•
Unsolicited proposal;
•
Investment in real estate and related assets;
•
Property dispositions; and
•
Notes payable and other borrowings.

67

Impact of Recent Accounting Pronouncements
Refer to Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for further explanation. There have been no accounting pronouncements issued, but not yet applied by us, that will significantly impact our financial statements.
Off Balance Sheet Arrangements
As of December 31, 2012 and 2011, we had no material off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity or capital resources.
ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2012, we and three of the Consolidated Joint Ventures had $701.8 million of variable rate debt, including the Revolving Loans and the repurchase agreements, and therefore we are exposed to interest rate changes in LIBOR. As of December 31, 2012, a change of 50 basis points in interest rates would result in a change in interest expense of $3.5 million per annum, assuming all of our derivatives remain effective hedges. In the future we may obtain additional variable rate debt financing to fund certain property acquisitions, and may be further exposed to interest rate changes. Our objectives in managing interest rate risks will be to limit the impact of interest rate changes on operations and cash flows, and to lower overall borrowing costs. To achieve these objectives, we will borrow primarily at interest rates with the lowest margins available and, in some cases, with the ability to convert variable interest rates to fixed rates. We have entered, and expect to continue to enter, into derivative financial instruments, such as interest rate swaps, in order to mitigate our interest rate risk on a given variable rate financial instrument. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes. We may also enter into rate lock arrangements to lock interest rates on future borrowings. We may be exposed to credit and market risks including, but not limited to, the failure of any counterparty to perform under the terms of the derivative contract or the adverse effect on the value of the financial instrument resulting from a change in interest rates.
As of December 31, 2012, we had 63 interest rate swap agreements outstanding, which mature on various dates from June 2014 through April 2021, with an aggregate notional amount under the swap agreements of $744.3 million and an aggregate net fair value of $(23.0) million. The fair value of these interest rate swap agreements is dependent upon existing market interest rates and swap spreads. As of December 31, 2012, an increase of 50 basis points in interest rates would result in a decrease to the fair value of the derivative liability of $10.6 million.
We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data filed as part of this report are set forth beginning on page F-1 of this Annual Report on Form 10-K.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in or disagreements with our independent registered public accountants during the year ended December 31, 2012.
ITEM 9A.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we, under the supervision and with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures, as of December 31, 2012, were effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms promulgated under the Exchange Act, and is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosures.

68

Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Also, projections of any evaluation of internal control effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2012.
Changes in Internal Control Over Financial Reporting
No change occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.    OTHER INFORMATION
None.

69

PART III
ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required by this Item is incorporated by reference to our definitive proxy statement to be filed with the SEC with respect to our 2013 annual meeting of stockholders.
ITEM 11.    EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to our definitive proxy statement to be filed with the SEC with respect to our 2013 annual meeting of stockholders.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to our definitive proxy statement to be filed with the SEC with respect to our 2013 annual meeting of stockholders.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORS INDEPENDENCE
The information required by this Item is incorporated by reference to our definitive proxy statement to be filed with the SEC with respect to our 2013 annual meeting of stockholders.
ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is incorporated by reference to our definitive proxy statement to be filed with the SEC with respect to our 2013 annual meeting of stockholders.

70

PART IV
ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) List of Documents Filed.
1.
The list of the financial statements contained herein is set forth on page F-1 hereof.
2.
Financial Statement Schedules—
Schedule III—Real Estate Assets and Accumulated Depreciation is set forth beginning on page S-1 hereof.
Schedule IV—Mortgage Loans on Real Estate is set forth beginning on page S-15 hereof.
All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are not applicable and therefore have been omitted.
3.
The Exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.
(b) See (a) 3 above.
(c) See (a) 2 above.

71

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Cole Credit Property Trust III, Inc.
Phoenix, Arizona
We have audited the accompanying consolidated balance sheets of Cole Credit Property Trust III, Inc. and subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2012. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Cole Credit Property Trust III, Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 28, 2013



F-2

COLE CREDIT PROPERTY TRUST III, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
December 31, 2012
 
December 31, 2011
ASSETS
 
 
 
Investment in real estate assets:
 
 
 
Land
$
1,490,843

 
$
1,165,274

Buildings and improvements, less accumulated depreciation of $187,870 and $99,055, respectively
4,222,363

 
3,275,989

Acquired intangible lease assets, less accumulated amortization of $122,258 and $61,830, respectively
860,963

 
682,816

Total investment in real estate assets, net
6,574,169

 
5,124,079

Investment in notes receivable, net
90,358

 
64,683

Investment in marketable securities
51,103

 
41,750

Investment in marketable securities pledged as collateral
266,098

 
72,379

Investment in unconsolidated joint ventures
96,785

 
21,543

Total investment in real estate and related assets, net
7,078,513

 
5,324,434

Assets related to real estate held for sale, net
15,485

 
15,836

Cash and cash equivalents
192,504

 
216,353

Restricted cash
18,444

 
17,540

Rents and tenant receivables, less allowance for doubtful accounts of $337 and $202, respectively
79,760

 
60,712

Prepaid expenses and other assets
11,790

 
11,584

Deferred financing costs, less accumulated amortization of $23,105 and $11,305, respectively
57,229

 
51,109

Total assets
$
7,453,725

 
$
5,697,568

LIABILITIES AND EQUITY
 
 
 
Notes payable and other borrowings
$
3,292,048

 
$
2,373,984

Accounts payable and accrued expenses
42,756

 
33,815

Escrowed investor proceeds
—

 
1,930

Due to affiliates
4,525

 
4,847

Acquired below market lease intangibles, less accumulated amortization of $16,389 and $8,782, respectively
113,607

 
93,050

Distributions payable
26,399

 
20,858

Derivative liabilities, deferred rent and other liabilities
56,980

 
50,720

Total liabilities
3,536,315

 
2,579,204

Commitments and contingencies

 

Redeemable common stock
234,578

 
134,101

EQUITY:
 
 
 
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding
—

 
—

Common stock, $0.01 par value; 990,000,000 shares authorized, 479,547,099 and 385,236,590 shares issued and outstanding, respectively
4,795

 
3,852

Capital in excess of par value
4,068,015

 
3,322,924

Accumulated distributions in excess of earnings
(416,886
)
 
(319,031
)
Accumulated other comprehensive income (loss)
23,101

 
(24,757
)
Total stockholders’ equity
3,679,025

 
2,982,988

Noncontrolling interests
3,807

 
1,275

Total equity
3,682,832

 
2,984,263

Total liabilities and equity
$
7,453,725

 
$
5,697,568

The accompanying notes are an integral part of these consolidated financial statements.

F-3

COLE CREDIT PROPERTY TRUST III, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
 
 
 
Year Ended December 31,
 
 
2012
 
2011
 
2010
Revenues:
 
 
 
 
 
 
Rental and other property income
 
$
471,333

 
$
294,511

 
$
108,509

Tenant reimbursement income
 
44,541

 
21,564

 
6,101

Interest income on notes receivable
 
6,573

 
5,473

 
3,628

Interest income on marketable securities
 
20,495

 
2,432

 
—

Total revenue
 
542,942

 
323,980

 
118,238

Expenses:
 
 
 
 
 
 
General and administrative expenses
 
14,915

 
10,155

 
5,905

Property operating expenses
 
49,278

 
24,045

 
6,916

Property and asset management expenses
 
46,364

 
27,225

 
10,378

Acquisition related expenses
 
63,892

 
59,433

 
50,096

Depreciation
 
103,719

 
61,198

 
20,460

Amortization
 
55,890

 
33,057

 
12,007

Total operating expenses
 
334,058

 
215,113

 
105,762

Operating income
 
208,884

 
108,867

 
12,476

Other income (expense):
 
 
 
 
 
 
Equity in income (loss) of unconsolidated joint ventures
 
2,183

 
1,475

 
(206
)
Other income
 
4,446

 
344

 
1,277

Gain on sale of marketable securities
 
12,455

 
—

 
—

Interest expense
 
(140,113
)
 
(78,968
)
 
(22,969
)
Total other expense
 
(121,029
)
 
(77,149
)
 
(21,898
)
Income (loss) from continuing operations
 
87,855

 
31,718

 
(9,422
)
Discontinued operations
 
 
 
 
 
 
Income from discontinued operations
 
7,126

 
14,053

 
2,819

Gain on sale of real estate assets
 
108,457

 
—

 
—

Total income from discontinued operations
 
115,583

 
14,053

 
2,819

Net income (loss)
 
203,438

 
45,771

 
(6,603
)
Net income (loss) allocated to noncontrolling interests
 
100

 
475

 
(310
)
Net income (loss) attributable to the Company
 
$
203,338

 
$
45,296

 
$
(6,293
)
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
Basic and diluted
 
463,216,187

 
309,363,838

 
174,764,966

Income (loss) from continuing operations per common share:
 
 
 
 
Basic and diluted
 
$
0.19

 
$
0.10

 
$
(0.05
)
Total income from discontinued operations per common share:
 
 
 
 
Basic and diluted
 
$
0.25

 
$
0.05

 
$
0.02

Net income (loss) attributable to the Company per common share:
 
 
 
 
Basic and diluted
 
$
0.44

 
$
0.15

 
$
(0.04
)
The accompanying notes are an integral part of these consolidated financial statements.

F-4

COLE CREDIT PROPERTY TRUST III, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
 
 
 
Year Ended December 31,
 
 
2012
 
2011
 
2010
Net income (loss)
 
$
203,438

 
$
45,771

 
$
(6,603
)
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
Unrealized gain on marketable securities
 
53,664

 
1,335

 
—

Reclassification of previous unrealized gain on marketable securities into net income
 
(8,852
)
 
—

 
—

Unrealized loss on interest rate swaps
 
(6,217
)
 
(18,904
)
 
(7,053
)
Reclassification of previous unrealized loss on interest rate swaps into net income
 
9,263

 
—

 
—

Total other comprehensive income (loss)
 
47,858

 
(17,569
)
 
(7,053
)
 
 
 
 
 
 
 
Total comprehensive income (loss)
 
251,296

 
28,202

 
(13,656
)
Comprehensive income (loss) attributable to noncontrolling interest
 
100

 
475

 
(310
)
Total comprehensive income (loss) attributable to the Company
 
$
251,196

 
$
27,727

 
$
(13,346
)
The accompanying notes are an integral part of these consolidated financial statements.


F-5

COLE CREDIT PROPERTY TRUST III, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except share amounts)
 

 
 
 
 
 
Accumulated
 
Accumulated
 

 
 
 
 
 
Common Stock
 
Capital in
 
Distributions
 
Other
 
Total
 
Non-
 
 
 
Number of
 
Par
 
Excess
 
in Excess of
 
Comprehensive
 
Stockholders’
 
controlling
 
Total
 
Shares
 
Value
 
of Par Value
 
Earnings
 
(Loss) Gain
 
Equity
 
Interests
 
Equity
Balance, January 1, 2010
98,002,392

 
$
980

 
$
865,617

 
$
(34,999
)
 
$
(135
)
 
$
831,463

 
$
—

 
$
831,463

Issuance of common stock
151,272,210

 
1,513

 
1,505,839

 
—

 
—

 
1,507,352

 
—

 
1,507,352

Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
681

 
681

Distributions to investors
—

 
—

 
—

 
(121,748
)
 
—

 
(121,748
)
 
—

 
(121,748
)
Commissions on stock sales and related dealer manager fees
—

 
—

 
(127,753
)
 
—

 
—

 
(127,753
)
 
—

 
(127,753
)
Other offering costs
—

 
—

 
(14,013
)
 
—

 
—

 
(14,013
)
 
—

 
(14,013
)
Redemptions of common stock
(1,204,238
)
 
(12
)
 
(11,646
)
 
—

 
—

 
(11,658
)
 
—

 
(11,658
)
Changes in redeemable common stock
—

 
—

 
(53,516
)
 
—

 
—

 
(53,516
)
 
—

 
(53,516
)
Comprehensive loss
—

 
—

 
—

 
(6,293
)
 
(7,053
)
 
(13,346
)
 
(310
)
 
(13,656
)
Balance, December 31, 2010
248,070,364

 
2,481

 
2,164,528

 
(163,040
)
 
(7,188
)
 
1,996,781

 
371

 
1,997,152

Issuance of common stock
141,490,293

 
1,414

 
1,405,275

 
—

 
—

 
1,406,689

 
—

 
1,406,689

Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
481

 
481

Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(52
)
 
(52
)
Distributions to investors
—

 
—

 
—

 
(201,287
)
 
—

 
(201,287
)
 
—

 
(201,287
)
Commissions on stock sales and related dealer manager fees
—

 
—

 
(114,550
)
 
—

 
—

 
(114,550
)
 
—

 
(114,550
)
Other offering costs
—

 
—

 
(21,572
)
 
—

 
—

 
(21,572
)
 
—

 
(21,572
)
Redemptions of common stock
(4,324,067
)
 
(43
)
 
(41,847
)
 
—

 
—

 
(41,890
)
 
—

 
(41,890
)
Changes in redeemable common stock
—

 
—

 
(68,203
)
 
—

 
—

 
(68,203
)
 
—

 
(68,203
)
Purchase of investment from noncontrolling interest
—

 
—

 
(707
)
 
—

 
—

 
(707
)
 
—

 
(707
)
Comprehensive income (loss)
—

 
—

 
—

 
45,296

 
(17,569
)
 
27,727

 
475

 
28,202

Balance, December 31, 2011
385,236,590

 
3,852

 
3,322,924

 
(319,031
)
 
(24,757
)
 
2,982,988

 
1,275

 
2,984,263

Issuance of common stock
101,309,317

 
1,013

 
1,000,935

 
—

 
—

 
1,001,948

 
—

 
1,001,948

Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
2,938

 
2,938

Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(506
)
 
(506
)
Distributions to investors
—

 
—

 
—

 
(301,193
)
 
—

 
(301,193
)
 
—

 
(301,193
)
Commissions on stock sales and related dealer manager fees
—

 
—

 
(72,926
)
 
—

 
—

 
(72,926
)
 
—

 
(72,926
)
Other offering costs
—

 
—

 
(13,188
)
 
—

 
—

 
(13,188
)
 
—

 
(13,188
)
Redemptions of common stock
(6,998,808
)
 
(70
)
 
(68,532
)
 
—

 
—

 
(68,602
)
 
—

 
(68,602
)
Changes in redeemable common stock
—

 
—

 
(100,477
)
 
—

 
—

 
(100,477
)
 
—

 
(100,477
)
Purchase of investment from noncontrolling interest
—

 
—

 
(721
)
 
—

 
—

 
(721
)
 
—

 
(721
)
Comprehensive income
—

 
—

 
—

 
203,338

 
47,858

 
251,196

 
100

 
251,296

Balance, December 31, 2012
479,547,099

 
$
4,795

 
$
4,068,015

 
$
(416,886
)
 
$
23,101

 
$
3,679,025

 
$
3,807

 
$
3,682,832

The accompanying notes are an integral part of these consolidated financial statements.

F-6

COLE CREDIT PROPERTY TRUST III, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
Year Ended December 31,
 
2012
 
2011
 
2010
Cash flows from operating activities:
 
 
 
 
 
Net income (loss)
$
203,438

 
$
45,771

 
$
(6,603
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
Depreciation
110,533

 
70,823

 
25,720

Amortization of lease intangibles and deferred financing costs, net
74,869

 
46,253

 
16,478

Accretion of marketable securities and notes receivable, net
(4,280
)
 
(1,788
)
 
(642
)
Bad debt expense
309

 
213

 
97

Equity in (income) loss of unconsolidated joint ventures
(2,183
)
 
(1,475
)
 
206

Return on investment from unconsolidated joint ventures
2,183

 
1,475

 
946

Gain on sale and condemnation of real estate assets
(109,121
)
 
—

 
(34
)
Gain on sale of marketable securities
(12,455
)
 
—

 
—

Changes in assets and liabilities:
 
 
 
 
 
Rents and tenant receivables
(31,184
)
 
(36,421
)
 
(21,760
)
Prepaid expenses and other assets
(4,537
)
 
(3,766
)
 
(1,717
)
Accounts payable and accrued expenses
3,832

 
10,769

 
11,228

Deferred rent and other liabilities
10,310

 
10,535

 
11,643

Due to affiliates
750

 
3,292

 
230

Net cash provided by operating activities
242,464

 
145,681

 
35,792

Cash flows from investing activities:
 
 
 
 
 
Investment in real estate and related assets
(2,335,620
)
 
(2,342,527
)
 
(2,329,385
)
Return of investment and repayment of advance from unconsolidated joint ventures
22,748

 
1,148

 
—

Principal repayments from notes receivable
864

 
276

 
—

Proceeds from sale and condemnation of real estate assets
536,113

 
18

 
44

Proceeds from sale of marketable securities
63,422

 
—

 
—

Payment of property escrow deposits
(48,407
)
 
(43,050
)
 
(40,653
)
Refund of property escrow deposits
53,096

 
38,875

 
40,150

Change in restricted cash
(904
)
 
(5,417
)
 
(10,932
)
Net cash used in investing activities
(1,708,688
)
 
(2,350,677
)
 
(2,340,776
)
Cash flows from financing activities:
 
 
 
 
 
Proceeds from issuance of common stock
832,869

 
1,296,596

 
1,442,178

Offering costs on issuance of common stock
(87,195
)
 
(135,362
)
 
(141,935
)
Redemptions of common stock
(68,602
)
 
(41,890
)
 
(11,658
)
Distributions to investors
(126,573
)
 
(84,784
)
 
(47,439
)
Proceeds from notes payable and other borrowings
2,025,253

 
1,547,220

 
922,392

Repayment of notes payable and other borrowings
(1,107,062
)
 
(239,401
)
 
(1,136
)
Payment of loan deposits
(5,463
)
 
(6,704
)
 
(14,676
)
Refund of loan deposits
6,653

 
6,234

 
14,642

Payment on earnout liabilities
(7,429
)
 
—

 
—

Change in escrowed investor proceeds liability
(1,930
)
 
1,482

 
(673
)
Deferred financing costs paid
(20,578
)
 
(32,413
)
 
(26,167
)
Contributions from noncontrolling interests
2,938

 
481

 
681

Distributions to noncontrolling interests
(506
)
 
(52
)
 
—

Net cash provided by financing activities
1,442,375

 
2,311,407

 
2,136,209

Net (decrease) increase in cash and cash equivalents
(23,849
)
 
106,411

 
(168,775
)
Cash and cash equivalents, beginning of year
216,353

 
109,942

 
278,717

Cash and cash equivalents, end of year
$
192,504

 
$
216,353

 
$
109,942

The accompanying notes are an integral part of these consolidated financial statements.

F-7

COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS
Cole Credit Property Trust III, Inc. (the “Company”) is a Maryland corporation that was formed on January 22, 2008, which has elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes. Substantially all of the Company’s business is conducted through Cole REIT III Operating Partnership, LP (“CCPT III OP”), a Delaware limited partnership. The Company is the sole general partner of, and owns a 99.99% partnership interest in, CCPT III OP. Cole REIT Advisors III, LLC (“CR III Advisors”), the advisor to the Company, is the sole limited partner and owner of an insignificant noncontrolling partnership interest of less than 0.01% of CCPT III OP.
As of December 31, 2012, the Company owned 1,014 properties, comprising 43.1 million rentable square feet of single and multi-tenant retail and commercial space located in 47 states, which include properties owned through consolidated joint venture arrangements. As of December 31, 2012, the rentable space at these properties was 99% leased. As of December 31, 2012, the Company also owned 29 commercial mortgage backed securities (“CMBS”) and three notes receivable. In addition, through unconsolidated joint venture arrangements, as of December 31, 2012, the Company had interests in 12 properties comprising 2.3 million rentable square feet of commercial and retail space.
The Company ceased offering shares of common stock in its initial primary offering (the “Initial Offering”) on October 1, 2010. At the completion of the Initial Offering, a total of approximately 217.5 million shares of common stock had been issued, including approximately 211.6 million shares issued in the primary offering and approximately 5.9 million shares issued pursuant to a distribution reinvestment plan (the “DRIP”). The remaining 32.5 million unsold shares in the Initial Offering were deregistered.
The Company ceased offering shares of its common stock pursuant to a follow-on offering of up to 275.0 million shares (the “Follow-on Offering”) on April 27, 2012. At the completion of the Follow-on Offering, a total of approximately 262.2 million shares of common stock had been issued, including approximately 242.9 million shares issued in the primary offering and approximately 19.3 million shares issued pursuant to the DRIP. The remaining 12.8 million unsold shares in the Follow-on Offering were deregistered.
In addition, the Company registered 75.0 million shares of common stock under the DRIP pursuant to a registration statement filed on Form S-3 (the “DRIP Offering” and collectively with the Initial Offering and Follow-on Offering, the “Offerings”), which was filed with the SEC on March 14, 2012 and automatically became effective with the SEC upon filing. The Company will continue to issue shares of common stock under the DRIP Offering until such time as the Company’s shares are listed on a national securities exchange or the DRIP Offering is otherwise terminated by the Company’s board of directors.
As of December 31, 2012, the Company had issued approximately 492.1 million shares of its common stock in the Offerings, including approximately 12.4 million shares issued in the DRIP Offering. The Company had aggregate gross proceeds from the Offerings of $4.9 billion (including shares sold pursuant to the Company’s DRIP) as of December 31, 2012, before share redemptions of $122.4 million and offering costs, selling commissions and dealer management fees of $463.2 million.
On March 5, 2013, the Company, Cole Holdings Corporation (“Holdings”), an Arizona corporation that is the parent company and indirect owner of the Company’s advisor and is wholly owned by Christopher H. Cole, the chairman of the board of directors, chief executive officer and president of the Company (the “Holdings Stockholder”), CREInvestments, LLC, a Maryland limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), and the Holdings Stockholder entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides for the merger of Holdings with and into Merger Sub (the “Merger”), with Merger Sub surviving and continuing its existence under the laws of the state of Maryland as a wholly owned subsidiary of the Company. Upon consummation of the Merger, the Company intends to list its shares of common stock on the New York Stock Exchange. Refer to Note 2 for further discussion regarding the Merger.

F-8
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



NOTE 2 — MERGER AGREEMENT
A special committee of independent directors of the Company unanimously recommended the Merger and the board of directors of the Company (the “Board”) unanimously approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, the outstanding shares of common stock, par value $0.01 per share, of Holdings (“Holdings Common Stock”) will be converted into the right to receive upfront consideration from the Company of $20.0 million in cash, subject to adjustment, and 10,711,225 newly-issued shares of common stock of the Company (the “Upfront Stock Consideration”). The Merger Agreement also includes the following contingent amounts to be paid by the Company: (i) upon a listing of the Company’s common stock on the New York Stock Exchange (“NYSE”), 2,142,245 newly-issued shares of the Company’s common stock will be payable to the Holdings Stockholder (the “Listing Consideration”), and (ii) additional shares of the Company’s common stock are potentially payable in 2017 as an “earn-out” contingent upon the acquired business’ demonstrated financial success based on two criteria: (a) the acquired business generating Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) above a minimum threshold and (b) the Company’s stock performance relative to its peer group (the “Earnout Consideration”). The Upfront Stock Consideration and the Listing Consideration are subject to a three-year lockup with approximately one-third of the shares released each year. The stock consideration payable in 2017 is subject to a lockup until December 31, 2017. Additionally, pursuant to the terms of the Company’s advisory agreement with its current advisor, Holdings may receive an additional amount of the Company’s common stock based on the average closing price over a period of 30 consecutive trading days beginning 180 days after the Company’s shares of common stock are listed; however, Holdings has agreed, as part of the transaction, to a 25% reduction from the amount payable under the advisory agreement as a result of a listing of the Company’s common stock, if any. Other executives of Holdings would receive a portion of the consideration to be paid in connection with the Merger pursuant to certain bonus arrangements.
The Merger Agreement contains customary representations, warranties, covenants and agreements of Holdings, the Holdings Stockholder, the Company and Merger Sub. The consummation of the Merger is subject to various conditions for the benefit of the Company and Merger Sub, on the one hand, or Holdings and the Holdings Stockholder, on the other hand, or for all parties’ benefit, as applicable, including, among others, (i) the absence of any law or order prohibiting the consummation of the Merger, (ii) certain consents, approvals, permits and authorizations having been obtained, (iii) receipt of certain regulatory approvals, (iv) subject to the standards set forth in the Merger Agreement, the accuracy of the representations and warranties of each party thereto, (v) compliance by each party with its covenants and agreements under the Merger Agreement in all material respects, (vi) no event, change, effect, development, condition or occurrence that has had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Company or Holdings, (vii) the delivery of certain opinions of counsel related to the qualification of the Merger as a “reorganization” for tax purposes and the qualification of the Company as a real estate investment trust, and (viii) no pending litigation challenging the Merger which, if determined adversely to the Company, Holdings or the Holdings Stockholder, would be, or would be reasonably likely to be, material to (a) the combined business of the Company, Holdings and their subsidiaries and as a result of which the Company’s special committee of the Board has determined that the Merger and the other transactions contemplated by the Merger Agreement are no longer in the best interests of the Company’s stockholders or (b) the Holdings Stockholder and as a result of which the Holdings Stockholder has determined that the Merger and the other transactions contemplated by the Merger Agreement are no longer in the best interests of the Holdings Stockholder.
The Merger Agreement contains certain termination rights for both the Company and Holdings, including the right to terminate the Merger Agreement if the Merger is not consummated on or before June 30, 2013 and if the requisite regulatory approvals are not obtained. The Holdings Stockholder has also agreed, subject to certain limitations, to indemnify the Company with respect to certain representations and warranties regarding Holdings and other matters.
If the Merger is completed, the Company and the Holdings Stockholder will enter into a customary escrow agreement pursuant to which approximately one-third of the Upfront Stock Consideration will be escrowed, in part to satisfy the Holding Stockholder’s indemnity obligations. If listing occurs during the first year after closing, one-third of the Listing Consideration will be added to the escrowed shares, subject to the same escrow terms.
At the closing of the Merger, the Company would enter into a registration rights agreement pursuant to which the Company will agree to customary demand and piggyback registration rights with respect to the shares of the Company’s common stock issued pursuant to the Merger Agreement.
As of December 31, 2012, the Company had incurred $3.5 million for legal, consulting and other expenses related to the Merger, which is included in acquisition related expenses in the consolidated statements of operations. Subsequent to December 31, 2012, the Company has incurred $11.1 million of such Merger expenses.

F-9
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”), in all material respects, and have been consistently applied in preparing the accompanying consolidated financial statements.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and consolidated joint venture arrangements in which the Company has controlling financial interests. The portions of the consolidated joint venture arrangements not owned by the Company were presented as noncontrolling interests as of and during the period consolidated. All intercompany balances and transactions have been eliminated in consolidation. Certain prior year balances have been reclassified in the consolidated balance sheets and statements of operations to conform with the current year presentation of real estate assets held for sale and discontinued operations.
The Company evaluates its relationships and investments to determine if it has variable interests.  A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns.  If the Company determines that it has a variable interest in an entity, it evaluates whether such interest is in a variable interest entity (“VIE”).  A VIE is broadly defined as an entity where either (1) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance or (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support.  The Company consolidates any VIEs when it is determined to be the primary beneficiary of the VIE’s operations.
A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance, its form of ownership interest, its representation on the entity’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions and to replace the manager of and/or liquidate the entity.
The Company continually evaluates the need to consolidate joint ventures based on standards set forth in GAAP. In determining whether the Company has a controlling interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, power to make decisions and contractual and substantive participating rights of the partners/members as well as whether the entity is a VIE for which the Company is the primary beneficiary. As of December 31, 2012, the Company consolidated the accounts of three joint ventures (the “Consolidated Joint Ventures”), which held real estate assets with an aggregate book value of $55.0 million.
In addition, the Company evaluates its investments in marketable securities to determine if they represent variable interests in VIEs. As of December 31, 2012, the Company determined that investments in marketable securities are variable interests in VIEs, of which the Company is not the primary beneficiary because it does not have the ability to direct the activities of the VIEs that most significantly impact each entity’s economic performance. The Company’s maximum exposure to loss from these investments does not exceed their aggregate amortized cost basis of $271.1 million.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 

F-10
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Investment in and Valuation of Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation and amortization. Amounts capitalized to real estate assets consist of the cost of acquisition, excluding acquisition related expenses, construction and any tenant improvements, major improvements and betterments that extend the useful life of the real estate assets and leasing costs. All repairs and maintenance are expensed as incurred.
The Company is required to make subjective assessments as to the useful lives of its depreciable assets. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life of the assets. Real estate assets, other than land, are depreciated or amortized on a straight-line basis. The estimated useful lives of the Company’s real estate assets by class are generally as follows:
Buildings
40 years
Tenant improvements
Lesser of useful life or lease term
Intangible lease assets
Lease term
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to, bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions and other factors, a significant decrease in a property’s revenues due to lease terminations, vacancies, co-tenancy clauses, reduced lease rates or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions. No impairment indicators were identified and no impairment losses were recorded during the years ended December 31, 2012, 2011, and 2010.
When developing estimates of expected future cash flows, the Company makes certain assumptions regarding future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, terminal capitalization and discount rates, the expected number of months it takes to re-lease the property, required tenant improvements and the number of years the property will be held for investment. The use of alternative assumptions in estimating expected future cash flows could result in a different determination of the property’s expected future cash flows and a different conclusion regarding the existence of an impairment, the extent of such loss, if any, as well as the fair value of the real estate assets.
When a real estate asset is identified by the Company as held for sale, the Company ceases depreciation and amortization of the assets related to the property and estimates the fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount would be recorded to reflect the estimated fair value of the property, net of selling costs.
Allocation of Purchase Price of Real Estate Assets
Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and identified intangible assets and liabilities, consisting of the value of above market and below market leases and the value of in-place leases, based in each case on their respective fair values. Acquisition related expenses are expensed as incurred. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and building). The Company obtains an independent appraisal for each real property acquisition. The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information. 

F-11
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



The fair values of above market and below market lease intangibles are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (1) the contractual amounts to be paid pursuant to the in-place leases and (2) an estimate of fair market lease rates for the corresponding in-place leases, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease including any bargain renewal periods, with respect to a below market lease. The above market and below market lease intangibles are capitalized as intangible lease assets or liabilities, respectively. Above market leases are amortized as a reduction to rental income over the remaining terms of the respective leases. Below market leases are amortized as an increase to rental income over the remaining terms of the respective leases, including any bargain renewal periods. In considering whether or not the Company expects a tenant to execute a bargain renewal option, the Company evaluates economic factors and certain qualitative factors at the time of acquisition, such as the financial strength of the tenant, remaining lease term, the tenant mix of the leased property, the Company’s relationship with the tenant and the availability of competing tenant space. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market or below market lease intangibles relating to that lease would be recorded as an adjustment to rental income.
The fair values of in-place leases include estimates of direct costs associated with obtaining a new tenant and opportunity costs associated with lost rental and other property income which are avoided by acquiring a property with an in-place lease. Direct costs associated with obtaining a new tenant include commissions and other direct costs and are estimated in part by utilizing information obtained from independent appraisals and management’s consideration of current market costs to execute a similar lease. The intangible values of opportunity costs, which are calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease, are capitalized as intangible lease assets and are amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.
The Company estimates the fair value of assumed mortgage notes payable based upon indications of current market pricing for similar types of debt financing with similar maturities. Assumed mortgage notes payable are initially recorded at their estimated fair value as of the assumption date, and the difference between such estimated fair value and the mortgage note’s outstanding principal balance is amortized to interest expense over the term of the respective mortgage note payable.
The determination of the fair values of the real estate assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could impact the Company’s results of operations.
Discontinued Operations
Upon the disposal of a real estate asset or the determination of a real estate asset as being held for sale, the Company determines if the asset disposed of is considered a component of the Company. A component is comprised of operations and cash flows that can clearly be distinguished, operationally and for financial reporting purposes, from the rest of the Company. If the asset is considered a component of the Company, the results of operations and gains or losses on the sale of the component are required to be presented in discontinued operations if both of the following criteria are met: (1) the operations and cash flows of the asset have been (or will be) eliminated from the ongoing operations of the Company as a result of the disposal transaction and (2) the Company will not have any significant continuing involvement in the operations of the asset after the disposal transaction. Also, the prior period results of operations for the asset are reclassified and presented in discontinued operations in the prior consolidated statements of operations.
Sale of Real Estate Assets
Gains on the sale of real estate assets are generally recognized by the full accrual method when the following criteria are met: (1) the gain is determinable, that is, the collectability of the sales price is reasonably assured or the amount that will not be collectible can be estimated, and (2) the earnings process is virtually complete, that is, the Company is not obligated to perform significant activities after the sale to earn the gain. 

F-12
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Investment in Notes Receivable
Notes receivable consist of loans acquired by the Company, which are secured by real estate properties. Notes receivable are recorded at stated principal amounts net of any discount or premium and deferred loan origination costs or fees. The related discounts or premiums are accreted or amortized over the life of the related note receivable. The Company defers certain loan origination and commitment fees and amortizes them as an adjustment of yield over the term of the related note receivable. The related accretion of discounts and/or amortization of premiums and origination costs are recorded in interest income on notes receivable. The Company evaluates the collectability of both interest and principal on each note receivable to determine whether it is collectible, primarily through the evaluation of credit quality indicators such as underlying collateral and payment history. A note receivable is considered to be impaired, when based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. If a note receivable is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the note receivable’s effective interest rate or to the value of the underlying collateral if the note receivable is collateral dependent. Interest income on performing notes receivable is accrued as earned. Interest income on impaired notes receivable is recognized on a cash basis. Evaluating notes receivable for potential impairment can require management to exercise significant judgments. No impairment losses or allowances were recorded related to notes receivable for the years ended December 31, 2012, 2011 and 2010.
Investment in Marketable Securities
Investments in marketable securities consist of investments in CMBS, including those pledged as collateral. The Company classifies its investments as available-for-sale because although the Company does not actively trade these securities, the Company may sell them prior to their maturity. These investments are carried at estimated fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss). The Company uses estimated non-binding quoted market prices from the trading desks of financial institutions that are dealers in such securities, where available, for similar CMBS tranches that actively participate in the CMBS market and industry benchmarks, such as Trepp’s CMBS Analytics, where applicable. Market conditions, such as interest rates, liquidity, trading activity and credit spreads may cause significant variability to the received quotes. If the Company is unable to obtain quotes or if the Company believes the quotes received are inaccurate, the Company would estimate fair value using internal models that primarily consider Trepp’s CMBS Analytics, expected cash flows, known and expected defaults and rating agency reports. Changes in market conditions could result in a significant increase or decrease in the recorded amount of the securities. Significant judgment is involved in valuations and different judgments and assumptions used in management’s valuation could result in alternative valuations. If there are significant disruptions to the financial markets, the Company’s estimates of fair value may have significant volatility. Upon the sale of a security, the realized net gain or loss is computed on a specific identification basis.
The Company monitors its available-for-sale securities for impairments. A loss is recognized when the Company determines that a decline in the estimated fair value of a security below its amortized cost is other-than-temporary. The Company considers many factors in determining whether the impairment of a security is deemed to be other-than-temporary, including, but not limited to, the length of time the security has had a decline in estimated fair value below its amortized cost, the amount of the unrealized loss, the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value, recent events specific to the issuer or industry, external credit ratings and recent changes in such ratings. The analysis of determining whether the impairment of a security is deemed to be other-than-temporary requires significant judgments and assumptions. The use of alternative judgments and assumptions could result in a different conclusion.
Accretion of discounts on the CMBS is recognized based on the effective yield method and is recorded in the accompanying consolidated statements of operations in interest income on marketable securities. The effective yield on these CMBS is based on the projected cash flows from each security, which are estimated based on the Company’s observation of current information and events and include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. The Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models, and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, and prepayments of principal. Therefore actual maturities of the securities may be shorter than stated contractual maturities.

F-13
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturities when purchased of three months or less to be cash equivalents. The Company considers investments in highly liquid money market accounts to be cash equivalents.
Restricted Cash and Escrows
Included in restricted cash was $14.0 million and $15.2 million as of December 31, 2012 and 2011, respectively, held by lenders in escrow accounts for tenant and capital improvements, leasing commissions, repairs and maintenance and other lender reserves for certain properties, in accordance with the respective lender’s loan agreement. Also included in restricted cash was $4.4 million and $387,000 held by lenders in a lockbox account, as of December 31, 2012 and 2011, respectively. As part of certain debt agreements, rents from certain encumbered properties are deposited directly into a lockbox account, from which the monthly debt service payment is disbursed to the lender and the excess is disbursed to the Company. In addition, the Company had escrowed investor proceeds for which shares of common stock had not been issued of $1.9 million in restricted cash as of December 31, 2011. There were no escrowed investor proceeds included in restricted cash as December 31, 2012.
Investment in Unconsolidated Joint Ventures
Investment in unconsolidated joint ventures as of December 31, 2012 consisted of the Company’s interest in seven joint ventures that owned 12 multi-tenant properties (the “Unconsolidated Joint Ventures”). The Company accounts for the Unconsolidated Joint Ventures using the equity method of accounting as the Company has the ability to exercise significant influence, but not control, over operating and financial policies of these investments. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the joint venture’s earnings and distributions. The Company is required to determine whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of its investment in the joint venture. If an event or change in circumstance has occurred, the Company is required to evaluate the joint venture for potential impairment and determine if the carrying amount of its investment exceeds its fair value. An impairment charge is recorded when an impairment is deemed to be other-than-temporary. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until the carrying amount is fully recovered. The evaluation of an investment in a joint venture for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions.  The use of different judgments and assumptions could result in different conclusions. No impairment indicators were identified and no impairment losses were recorded related to the Unconsolidated Joint Ventures for the years ended December 31, 2012, 2011 or 2010.
Rents and Tenant Receivables
Rents and tenant receivables primarily includes amounts to be collected in future periods related to the recognition of rental income on a straight-line basis over the lease term and cost recoveries due from tenants. The Company makes estimates of the uncollectability of its accounts receivable related to base rents, expense reimbursements and other revenues. The Company analyzes accounts receivable and historical bad debt levels, customer creditworthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy, if any, are analyzed and estimates are made in connection with the expected recovery of pre-petition and post-petition claims. The Company’s reported net income or loss is directly affected by management’s estimate of the collectability of accounts receivable. The Company records allowances for those balances that the Company deems to be uncollectible, including any amounts relating to straight-line rent receivables.
Prepaid Expenses
Prepaid expenses include expenses paid as of the balance sheet date that relate to future periods and will be expensed or reclassified to another account during the period to which the costs relate. Any amounts with no future economic benefit are charged to earnings when identified.

F-14
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Derivative Instruments and Hedging Activities
The Company accounts for its derivative instruments, including certain derivative instruments embedded in other contracts, at fair value. Accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative instrument and the designation of the derivative instrument. The change in fair value of the effective portion of the derivative instrument that is designated as a hedge is recorded as other comprehensive income (loss). The changes in fair value for derivative instruments that are not designated as a hedge or that do not meet the hedge accounting criteria are recorded as a gain or loss to operations.
Deferred Financing Costs
Deferred financing costs are capitalized and amortized on a straight-line basis over the term of the related financing arrangement, which approximates the effective interest method. If a note payable is prepaid, any unamortized deferred financing costs related to the note payable would be expensed. Amortization of deferred financing costs, including any write-offs, was $14.1 million, $8.4 million and $2.7 million for the years ended December 31, 2012, 2011 and 2010, respectively, and was recorded in interest expense in the consolidated statements of operations.
Revenue Recognition
Certain properties have leases where minimum rental payments increase during the term of the lease. The Company records rental income for the full term of each lease on a straight-line basis. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of determining this calculation. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred.
Income Taxes
The Company qualified and elected to be taxed as a REIT for federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. The Company generally is not subject to federal corporate income tax to the extent it distributes its taxable income to its stockholders, and so long as it, among other things, distributes at least 90% of its annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains). REITs are subject to a number of other organizational and operational requirements. Even if the Company maintains its qualification for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.
Concentration of Credit Risk
As of December 31, 2012, the Company had cash on deposit, including restricted cash, in 12 financial institutions, eight of which had deposits in excess of federally insured levels, totaling $93.0 million; however, the Company has not experienced any losses in such accounts. The Company limits significant cash investments to accounts held by financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits.
No single tenant accounted for greater than 10% of the Company’s 2012 gross annualized rental revenues. Tenants in the restaurant industry comprised 10% of the Company’s 2012 gross annualized rental revenues. Additionally, the Company has certain geographic concentrations in its property holdings. In particular, as of December 31, 2012, 190 of the Company’s properties were located in Texas accounting for 17% of its 2012 gross annualized rental revenues.
Offering and Related Costs
CR III Advisors funds all of the organization and offering costs on the Company’s behalf and is reimbursed for such costs up to 1.5% of gross proceeds from the Offerings, excluding selling commissions and the dealer-manager fee. During the years ended December 31, 2012, 2011 and 2010, the Company recorded $13.2 million, $21.6 million and $14.0 million, respectively, of organization and offering expense reimbursements for services provided by, and costs incurred by, CR III Advisors. The offering costs, which include items such as legal and accounting fees, marketing, personnel and promotional printing costs, are recorded as a reduction of capital in excess of par value along with sales commissions and dealer manager fees of 7% and 2%, respectively. Organization costs are expensed when incurred.

F-15
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Due to Affiliates
Certain affiliates of the Company’s advisor received, and will continue to receive fees, reimbursements, and compensation in connection with services provided relating to the acquisition, management, financing, leasing and sale of the assets of the Company.
Stockholders’ Equity
As of December 31, 2012 and 2011, the Company was authorized to issue 990.0 million shares of common stock and 10.0 million shares of preferred stock. All shares of such stock have a par value of $0.01 per share. The Company’s board of directors may amend the charter to authorize the issuance of additional shares of capital stock without obtaining stockholder approval.
Redeemable Common Stock
The Company has adopted a share redemption program that permits its stockholders to sell their shares, which is limited to redemptions that can be funded with cumulative net proceeds from the Company’s DRIP and subject to other limitations discussed in Note 17 to these consolidated financial statements. The Company records amounts that are redeemable under the share redemption program as redeemable common stock outside of permanent equity in its consolidated balance sheets. Changes in the amount of redeemable stock from period to period are recorded as an adjustment to capital in excess of par value.
Earnings (Loss) Per Share
Earnings per share are calculated based on the weighted average number of common shares outstanding during each period presented. Diluted income per share considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the years ended December 31, 2012, 2011 and 2010.
Reportable Segments
The Company’s operating segment consists of commercial properties, which include activities related to investing in real estate including retail, office and distribution properties and other real estate related assets. The commercial properties are geographically diversified throughout the United States and have similar economic characteristics. The Company evaluates operating performance on an overall portfolio level; therefore, the Company’s properties are one reportable segment.
Interest
Interest is charged to interest expense as it accrues, unless the interest relates to loans on properties under development, in which case it is capitalized. During the years ended December 31, 2012, 2011 and 2010, the Company capitalized $299,000, $48,000, and $26,000 respectively, of interest costs relating to the development projects as discussed in Note 5 to these consolidated financial statements.
Distributions Payable and Distribution Policy
In order to maintain its status as a REIT, the Company is required to, among other things, make distributions each taxable year equal to at least 90% of its taxable income, computed without regard to the dividends paid deduction and excluding net capital gains. To the extent funds are available, the Company intends to pay regular distributions to stockholders. Distributions are paid to stockholders of record as of the applicable record dates.
The Company’s board of directors authorized a daily distribution, based on 366 days in the calendar year, of $0.001776144 per share (which equates to 6.50% on an annualized basis calculated at the current rate, assuming a $10.00 per share purchase price) for stockholders of record as of the close of business on each day of the periods commencing on January 1, 2012 and ending on December 31, 2012. As of December 31, 2012, the Company had distributions payable of $26.4 million.

F-16
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Repurchase Agreements
In certain circumstances the Company may obtain financing through a repurchase agreement. The Company evaluates the initial transfer of a financial instrument and the related repurchase agreement for sale accounting treatment. In instances where the Company maintains effective control over the transferred securities, the Company accounts for the transaction as a secured borrowing, and accordingly, both the securities and related repurchase agreement payable are recorded separately in the consolidated balance sheets. In instances where the Company does not maintain effective control over the transferred securities, the Company accounts for the transaction as a sale of securities for proceeds consisting of cash and a forward purchase contract.
Recent Accounting Pronouncements
In May 2011, the U.S. Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-04, Fair Value Measurements and Disclosures (Topic 820): Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRS, (“ASU 2011-04”), which converges guidance between GAAP and International Financial Reporting Standards to provide a uniform framework of fair value measurements and requires additional disclosures including quantifiable information about measurements to changes in unobservable inputs for Level 3 fair value measurements. ASU 2011-04 became effective for the Company on January 1, 2012. The adoption of ASU 2011-04 did not have a material impact on the Company’s consolidated financial statements.
In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income, which requires the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The Company elected to present two separate but consecutive statements herein.
NOTE 4 — FAIR VALUE MEASUREMENTS
GAAP defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. GAAP emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows:
Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 – Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e. interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).
Level 3 – Unobservable inputs, which are only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability.
The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities:
Cash and cash equivalents and restricted cash – The Company considers the carrying values of these financial assets to approximate fair value because of the short period of time between their origination and their expected realization.
Notes receivable – The fair value is estimated by discounting the expected cash flows on the notes at rates at which management believes similar loans would be made as of December 31, 2012 and 2011. The estimated fair value of these notes was $97.3 million and $69.0 million as of December 31, 2012 and 2011, respectively, as compared to the carrying value of $90.4 million and $64.7 million as of December 31, 2012 and 2011, respectively. The fair value of the Company’s notes receivable is estimated using Level 2 inputs.

F-17
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Notes payable and other borrowings – The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of December 31, 2012 and 2011. The estimated fair value of the notes payable and other borrowings was $3.4 billion and $2.4 billion as of December 31, 2012 and 2011, respectively, as compared to the carrying value of $3.3 billion and $2.4 billion as of December 31, 2012 and 2011, respectively. The fair value of the Company’s notes payable and other borrowings is estimated using Level 2 inputs.
Marketable securities – The Company’s marketable securities are carried at fair value and are valued using Level 3 inputs. The Company used estimated non-binding quoted market prices from the trading desks of financial institutions that are dealers in such securities for similar CMBS tranches that actively participate in the CMBS market and industry benchmarks, such as Trepp’s CMBS Analytics. As of December 31, 2012 and 2011, no marketable securities were valued using internal models.
Derivative Instruments – The Company’s derivative instruments represent interest rate swaps. All derivative instruments are carried at fair value and are valued using Level 2 inputs. The fair value of these instruments is determined using interest rate market pricing models. The Company includes the impact of credit valuation adjustments on derivative instruments measured at fair value.
Earnout Agreements – The Company has acquired certain properties subject to earnout provisions obligating the Company to pay additional consideration to the seller contingent on the future leasing and occupancy of vacant space at each property. Earnout payments are based on a predetermined formula and have set time periods regarding the obligation to make the payment as set forth in the respective purchase and sale agreement. If, at the end of the respective time period, certain space has not been leased and occupied, the Company will have no further obligation under the applicable earnout provision. The earnouts are carried at fair value and are valued using Level 3 inputs, including estimated timing and probability of leasing the vacant space, as there is no public market for this item and thus Level 1 and Level 2 inputs are unavailable for an item of this nature. Earnouts are recorded upon acquisition of the related property at their estimated fair value, and any changes to the estimated fair value are reflected in the statements of operations. The estimated fair value of these agreements totaled $5.3 million and $5.5 million as of December 31, 2012 and 2011, respectively, and is included in the accompanying consolidated balance sheets in other liabilities. During the year ended December 31, 2012, the Company recorded additional earnout liabilities with an aggregate estimated fair value of $6.5 million upon purchase of certain properties. In addition, during the year ended December 31, 2012, the Company increased the fair value of the outstanding earnout agreements by $789,000, which is recorded in the accompanying consolidated statements of operations in acquisition related expenses. During the year ended December 31, 2012, the obligations under certain earnout provisions were satisfied and the Company paid $7.4 million to the seller.
Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, on disposition of the financial assets and liabilities. As of December 31, 2012, there have been no transfers of financial assets or liabilities between levels.
In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of December 31, 2012 and 2011 (in thousands):

F-18
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



 
Balance as of
December 31, 2012
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Marketable securities
$
317,201

 
$
—

 
$
—

 
$
317,201

Liabilities:
 
 
 
 
 
 
 
Interest rate swaps
$
(23,046
)
 
$
—

 
$
(23,046
)
 
$
—

Earnout agreements
(5,339
)
 
—

 
—

 
(5,339
)
Total liabilities
$
(28,385
)
 
$
—

 
$
(23,046
)
 
$
(5,339
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
Balance as of
December 31, 2011
 
Quoted Prices in
Active  Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable  Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Marketable securities
$
114,129

 
$
—

 
$
—

 
$
114,129

Liabilities:
 
 
 
 
 
 
 
Interest rate swaps
$
(26,092
)
 
$
—

 
$
(26,092
)
 
$
—

Earnout agreements
(5,519
)
 
—

 
—

 
(5,519
)
Total liabilities
$
(31,611
)
 
$
—

 
$
(26,092
)
 
$
(5,519
)
The following table shows a reconciliation of the change in fair value of the Company’s marketable securities with significant unobservable inputs (Level 3) for the years ended December 31, 2012 and 2011 (in thousands):
 
 
Year Ended December 31,
 
 
2012
 
2011
Balance at beginning of year
$
114,129

 
$
—

Total gains or losses
 
 
 
 
Reclassification of previous unrealized gain on marketable securities into net income
(8,852
)
 
—

 
Unrealized gain included in other comprehensive income (loss), net
53,664

 
1,335

Purchases, issuances, settlements, sales and accretion
 
 
 
 
Purchases
205,986

 
112,032

 
Issuances
—

 
—

 
Sales
(50,967
)
 
—

 
Accretion included in earnings, net
3,241

 
762

Balance at end of year
$
317,201

 
$
114,129


F-19
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



NOTE 5 — REAL ESTATE ACQUISITIONS
2012 Property Acquisitions
During the year ended December 31, 2012, the Company acquired interests in 349 commercial properties for an aggregate purchase price of $2.0 billion (the “2012 Acquisitions”). The Company purchased the 2012 Acquisitions with net proceeds from the Follow-on Offering, the DRIP Offering, borrowings and the sale of properties and other investments. The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation (in thousands):
 
December 31, 2012
Land
$
412,674

Building and improvements
1,330,874

Acquired in-place leases
252,186

Acquired above market leases
38,260

Acquired below market leases
(39,054
)
Total purchase price
$
1,994,940

The Company recorded revenue for the year ended December 31, 2012 of $81.4 million, respectively, and a net loss for the year ended December 31, 2012 of $25.7 million, respectively, related to the 2012 Acquisitions. The Company expensed $60.4 million of property related acquisition costs for the year ended December 31, 2012.
The following information summarizes selected financial information of the Company, as if all of the 2012 Acquisitions were completed on January 1, 2011 for each period presented below. The table below presents the Company’s estimated revenue and net income, on a pro forma basis, for the years ended December 31, 2012 and 2011, respectively (in thousands): 
 
 
Year Ended December 31,
 
 
2012
 
2011
Pro forma basis (unaudited):
 
 
 
 
Revenue
 
$
661,650

 
$
531,356

Net income
 
$
296,683

 
$
45,793

The unaudited pro forma information for the year ended December 31, 2012 was adjusted to exclude $60.4 million of property related acquisition costs recorded during the year ended December 31, 2012. These costs were recognized in the unaudited pro forma information for the year ended December 31, 2011. The unaudited pro forma information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of 2011, nor does it purport to represent the results of future operations.
2012 Investments in Development Projects
During the year ended December 31, 2012, the Company acquired a completed development project for an aggregate purchase price of $7.7 million through the repayment of a construction loan facility and the purchase of the joint venture partner’s noncontrolling interest. The Company also completed the construction of a single tenant office building. Total costs for the construction of the building were $12.2 million. The development of these projects was initiated in 2011, and therefore, these properties are not included in the 2012 Acquisitions.
2012 Investments in Unconsolidated Joint Ventures
During the year ended December 31, 2012, the Company acquired financial interests in two unconsolidated joint venture arrangements for an aggregate investment of $46.5 million. In addition, the Company acquired a $27.7 million financial interest in one of the Consolidated Joint Ventures during the year ended December 31, 2012, whose only assets are interests in three of the Unconsolidated Joint Ventures.

F-20
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



In connection with the acquired interests in the unconsolidated joint venture arrangements discussed above, one of the Unconsolidated Joint Ventures borrowed $17.6 million (the “Advance Note”) from one of the Consolidated Joint Ventures and fully repaid the Advance Note during the year ended December 31, 2012. The Advance Note had a variable interest rate equal to the one-month LIBOR plus 225 basis points. During the year ended December 31, 2012, the Company recorded $107,000 of interest income on the Advance Note. No financing coordination fees were incurred in connection with the Advance Note.
2011 Property Acquisitions
During the year ended December 31, 2011, the Company acquired interests in 244 commercial properties, including the properties held in two of the Consolidated Joint Ventures, for an aggregate purchase price of $2.2 billion (the “2011 Acquisitions”). The Company purchased the 2011 Acquisitions with net proceeds from the Offerings and through the issuance or assumption of mortgage notes and credit facility borrowings. The Company allocated the purchase price of the 2011 Acquisitions to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation (in thousands):
 
December 31, 2011
Land
$
448,728

Building and improvements
1,491,347

Acquired in-place leases
244,776

Acquired above market leases
69,823

Acquired below market leases
(32,402
)
Fair value adjustment of assumed notes payable
438

Total purchase price
$
2,222,710

The Company recorded revenue for the year ended December 31, 2011 of $84.6 million, respectively, and a net loss for the year ended December 31, 2011 of $16.5 million, respectively, related to the 2011 Acquisitions. The Company expensed $59.4 million of acquisition costs for the year ended December 31, 2011.
The following information summarizes selected financial information of the Company, as if all of the 2011 Acquisitions were completed on January 1, 2010 for each period presented below. The table below presents the Company’s estimated revenue and net income, on a pro forma basis, for the years ended December 31, 2011 and 2010, respectively (in thousands): 
 
 
Year Ended December 31,
 
 
2011
 
2010
Pro forma basis (unaudited):
 
 
 
 
Revenue
 
$
474,975

 
$
336,716

Net income
 
$
159,743

 
$
34,158

The unaudited pro forma information for the year ended December 31, 2011 was adjusted to exclude $59.4 million of acquisition costs recorded during the year ended December 31, 2011. These costs were recognized in the unaudited pro forma information for the year ended December 31, 2010. The unaudited pro forma information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of 2010, nor does it purport to represent the results of future operations.
2011 Investments in Development Projects
During the year ended December 31, 2011, the Company acquired a completed development project for an aggregate purchase price of $5.9 million through the repayment of a construction loan facility and the purchase of the joint venture partner’s noncontrolling interest. The development of this project was initiated in 2010, and therefore, this property purchase is not included in the 2011 Acquisitions.

F-21
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



In addition, the Company and one of the Consolidated Joint Ventures acquired three land parcels for development of two office facilities and a single tenant commercial property. As of December 31, 2011, the aggregate construction costs incurred of $12.3 million are included in the accompanying December 31, 2011 consolidated balance sheet in building and improvements. The land acquired for an aggregate amount of $9.3 million is included in land, and the aggregate construction facility borrowings of $4.6 million are included in notes payable and other borrowings in the accompanying December 31, 2011 consolidated balance sheet. As discussed above, the Company completed two of the three projects during the year ended December 31, 2012.
2011 Investments in Unconsolidated Joint Ventures
During the year ended December 31, 2011, the Company acquired an interest in an unconsolidated joint venture arrangement for $7.7 million.
NOTE 6 — ACQUIRED INTANGIBLE LEASE ASSETS
Acquired intangible lease assets consisted of the following (in thousands):
 
 
 
As of December 31,
 
 
 
2012
 
2011
Acquired in-place leases, net of accumulated amortization of $101,392 and $50,715,
 
 
 
 
 
respectively (with a weighted average life of 12.7 and 15.3 years, respectively)
 
$
710,469

 
$
543,663

Acquired above market leases, net of accumulated amortization of $20,866 and $11,115,
 
 
 
 
 
respectively (with a weighted average life of 13.2 and 15.9 years, respectively)
 
150,494

 
139,153

 
 
 
$
860,963

 
$
682,816

Amortization expense related to the acquired in-place lease assets for the years ended December 31, 2012, 2011 and 2010 was $55.9 million, $33.1 million and $12.0 million, respectively. Amortization expense related to the acquired above market lease assets for the years ended December 31, 2012, 2011 and 2010 was $11.6 million, $6.9 million and $2.1 million, respectively.
Estimated amortization expense of the intangible lease assets, excluding the intangible lease assets related to the Held for Sale Properties (as defined below), as of December 31, 2012 for each of the five succeeding fiscal years is as follows:
 
 
Amortization
Year Ending December 31,
 
Leases In-Place
 
Above Market Leases
2013
 
$
64,896

 
$
13,723

2014
 
$
62,474

 
$
13,283

2015
 
$
61,208

 
$
13,063

2016
 
$
58,201

 
$
12,476

2017
 
$
56,076

 
$
12,028

NOTE 7 — INVESTMENT IN NOTES RECEIVABLE
During the year ended December 31, 2012, the Company acquired a $25.0 million junior mezzanine loan (the “Mezzanine Loan”), secured by equity interests in a joint venture which owns 15 shopping centers. The Mezzanine Loan has an interest rate of LIBOR plus 9.0% with a LIBOR floor of 0.50% and matures in July 2015 with two one-year extension options. As of December 31, 2012, investment in notes receivable included $25.4 million related to the Mezzanine Loan, which consisted of the outstanding face amount of the loan of $25.0 million, $500,000 of acquisition costs and accumulated amortization of acquisition costs of $65,000. The acquisition costs are amortized over the term of the loan using the effective interest rate method. Interest only payments are due each month. There were no amounts past due as of December 31, 2012.
In addition, as of December 31, 2012, the Company owned two mortgage notes receivable, each of which is secured by an office building (collectively the “Mortgage Notes”). As of December 31, 2012 and 2011, investment in notes receivable included $64.9 million and $64.7 million, respectively, related to the Mortgage Notes. As of December 31, 2012, the Mortgage Notes balance consisted of the outstanding face amount of the notes of $72.9 million, a $12.0 million discount, $1.3 million of acquisition costs and net accumulated accretion of discounts and amortization of acquisition costs of $2.8 million. As of

F-22
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



December 31, 2011, the Mortgage Notes balance consisted of the outstanding face amount of the notes of $73.7 million, a $12.0 million discount, $1.3 million of acquisition costs and net accumulated accretion of discounts and amortization of acquisition costs of $1.7 million. The discount is accreted and acquisition costs are amortized over the terms of each respective Mortgage Note using the effective interest rate method. The Mortgage Notes have a fixed interest rate of 5.93% per annum and mature on October 1, 2018. Interest and principal payments are due each month until October 1, 2018. There were no amounts past due as of December 31, 2012.
The Company evaluates the collectability of both interest and principal on each note receivable to determine whether it is collectible, primarily through the evaluation of credit quality indicators, such as underlying collateral and payment history. No impairment losses were recorded related to notes receivable for the years ended December 31, 2012, 2011 or 2010. In addition, no allowances for uncollectability were recorded related to notes receivable as of December 31, 2012 or 2011.
NOTE 8 — INVESTMENT IN MARKETABLE SECURITIES
During the year ended December 31, 2012, the Company sold six CMBS and half of the Company’s investment in two CMBS for aggregate proceeds of $63.4 million and realized a gain on the sale of $12.5 million, of which $8.9 million had previously been recorded in other comprehensive income (loss). As of December 31, 2012, the Company owned 29 CMBS, with an estimated aggregate fair value of $317.2 million. As of December 31, 2011, the Company owned 11 CMBS, with an estimated aggregate fair value of $114.1 million.
As of December 31, 2012, certain of these securities were pledged as collateral under repurchase agreements (the “Repurchase Agreements”), as discussed in Note 11 to these consolidated financial statements. The following table provides the activity for the CMBS during the year ended December 31, 2012 (in thousands):
 
Amortized Cost Basis
 
Unrealized Gain
 
Fair Value
Marketable securities as of December 31, 2011
$
112,794

 
$
1,335

 
$
114,129

Face value of marketable securities acquired
320,020

 
—

 
320,020

Discounts on purchase of marketable securities, net of acquisition costs
(114,034
)
 
—

 
(114,034
)
Net accretion on marketable securities
3,241

 
—

 
3,241

Increase in fair value of marketable securities
—

 
53,664

 
53,664

Decrease due to sale of marketable securities
(50,967
)
 
(8,852
)
 
(59,819
)
Marketable securities as of December 31, 2012
$
271,054

 
$
46,147

 
$
317,201

The following table shows the fair value and gross unrealized gains and losses of the Company’s CMBS as of December 31, 2012 (in thousands) and the length of time the CMBS has been in the unrealized gain or continuous loss position:
 
Less than 12 months
 
12 Months or More
 
Total
Description
of Securities
Fair
Value
 
Unrealized
Gains
 
Unrealized
(Losses)
 
Fair
Value
 
Unrealized
Gains
 
Unrealized
(Losses)
 
Fair
Value
 
Unrealized
Gains
 
Unrealized
(Losses)
CMBS
$
317,201

 
$
48,192

 
$
(2,045
)
 
$
—

 
$
—

 
$
—

 
$
317,201

 
$
48,192

 
$
(2,045
)
As of December 31, 2012, the unrealized losses of $2.0 million were deemed to be a temporary impairment based upon the following: (1) the Company having no intent to sell these securities, (2) it is more likely than not that the Company will not be required to sell the securities before recovery and (3) the Company’s expectation to recover the entire amortized cost basis of these securities. The Company determined that the unrealized losses of $2.0 million resulted from volatility in interest rates and credit spreads and other qualitative factors relating to macro-credit conditions in the mortgage market. Additionally, as of December 31, 2012, the Company had determined that the subordinate CMBS tranches below the Company’s CMBS investment adequately protected the Company’s ability to recover its investment and that the Company’s estimates of anticipated future cash flows from the CMBS investment had not been adversely impacted by any deterioration in the creditworthiness of the specific CMBS issuers.

F-23
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



The scheduled maturity of the Company’s CMBS as of December 31, 2012 is as follows (in thousands):
 
Amortized Cost
 
Estimated Fair Value
Due within one year
$
—

 
$
—

Due after one year through five years
—

 
—

Due after five years through ten years
260,412

 
307,396

Due after ten years
10,642

 
9,805

 
$
271,054

 
$
317,201

Actual maturities of marketable securities can differ from contractual maturities because borrowers may have the right to prepay their respective loan balances at any time. In addition, factors such as prepayments and interest rates may affect the yields on the marketable securities.
NOTE 9 — DISCONTINUED OPERATIONS
During the year ended December 31, 2012, the Company disposed of 26 single-tenant properties and two multi-tenant properties for an aggregate gross sales price of $573.8 million (the “2012 Property Dispositions”). As of the respective closing dates of the 2012 Property Dispositions, the major class of assets and liabilities of these properties included net total investment in real estate assets of $450.2 million, straight-line rent receivables of $12.7 million, notes payable of $180.3 million, which includes $24.3 million assumed by the buyer, and net below market lease liabilities of $9.0 million. The Company has no continuing involvement with the 2012 Property Dispositions. The Company also classified two properties as held for sale as of December 31, 2012 (the “Held for Sale Properties”). The results of operations for the 2012 Property Dispositions and the Held for Sale Properties (collectively, the “Discontinued Operations Properties”) have been presented as discontinued operations on the Company’s consolidated statements of operations for all periods presented.
The following table summarizes the operating income from discontinued operations of the Discontinued Operations Properties for the years ended December 31, 2012, 2011 and 2010 (in thousands):
 
Year Ended December 31,
 
2012
 
2011
 
2010
Total revenue
$
34,308

 
$
42,322

 
$
25,318

Total expenses
27,182

 
28,269

 
22,499

Income from discontinued operations
7,126

 
14,053

 
2,819

Gain on sale of real estate assets
108,457

 
—

 
—

Total income from discontinued operations
$
115,583

 
$
14,053

 
$
2,819

The following table presents the major classes of assets and liabilities of the Held for Sale Properties as of December 31, 2012 and 2011 (in thousands):
 
Year Ended December 31,
 
2012
 
2011
Investment in real estate assets, net
$
15,376

 
$
15,759

Straight-line rent receivables
109

 
77

Assets related to real estate held for sale, net
$
15,485

 
$
15,836

 
 
 
 
Liabilities related to real estate assets held for sale (1)
$
322

 
$
347

________________
(1) Liabilities related to real estate assets held for sale includes net below market lease liabilities and prepaid rent and are included in derivative liabilities, deferred rent and other liabilities in the Company’s consolidated balance sheets for all periods presented.

F-24
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



NOTE 10 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In the normal course of business, the Company uses certain types of derivative instruments for the purpose of managing or hedging its interest rate risks. The following table summarizes the terms of the Company’s executed swap agreements designated as hedging instruments (in thousands):
 
 
 
 Outstanding Notional
 
 
 
 
 
 
 
Fair Value of Liabilities
 
Balance Sheet
 
Amount as of
 
Interest
 
Effective
 
Maturity
 
December 31,
 
December 31,
 
Location
 
December 31, 2012
 
Rates (1)
 
Dates
 
Dates
 
2012
 
2011
Interest Rate Swaps
Derivative liabilities, deferred rent and other liabilities
 
$
744,250

 
3.15% to 6.83%
 
12/18/2009 to 12/14/2012
 
6/27/2014 to 4/1/2021
 
$
(23,046
)
 
$
(26,092
)
_______________
(1)
The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread.
Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 4 to these consolidated financial statements. The notional amount under the agreements is an indication of the extent of the Company’s involvement in each instrument, but does not represent exposure to credit, interest rate or market risks.
Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company designated the interest rate swaps as cash flow hedges, to hedge the variability of the anticipated cash flows on its variable rate notes payable. The change in fair value of the effective portion of the derivative instruments that are designated as hedges is recorded in other comprehensive income or loss. The ineffective portion of the change in fair value of the derivative instruments is recorded in interest expense.
The following table summarizes the gains and losses on the Company’s derivative instruments and hedging activities for the years ended December 31, 2012, 2011 and 2010 (in thousands):
 
 
 
Amount of Loss Recognized in Other
Comprehensive Income (Loss)
 
Amount of Loss Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest Expense (1)
 
 
 
Year Ended December 31,
 
Year Ended December 31,
Derivatives in Cash Flow Hedging Relationships
 
2012
 
2011
 
2010
 
2012
 
2011
 
2010
Interest Rate Swaps 
 
$
(6,217
)
 
$
(18,904
)
 
$
(7,053
)
 
$
9,263

 
$
—

 
$
—

_______________
(1)
During the year ended December 31, 2012, an interest rate swap was designated as ineffective and the unrealized loss was reclassified from accumulated other comprehensive income (loss) into interest expense as it related to one of the 2012 Property Dispositions and the Company terminated the swap when the property was sold.
The Company has agreements with each of its derivative counterparties that contain a provision whereby if the Company defaults on certain of its unsecured indebtedness, then the Company could also be declared in default on its derivative obligations resulting in an acceleration of payment. In addition, the Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company believes it mitigates its credit risk by entering into agreements with credit-worthy counterparties. The Company records credit risk valuation adjustments on its interest rate swaps based on the respective credit quality of the Company and the counterparty. As of both December 31, 2012 and 2011, there were no events of default related to the interest rate swaps. As of December 31, 2011, there were no termination events related to the interest rate swaps.

F-25
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



NOTE 11 — NOTES PAYABLE AND OTHER BORROWINGS
As of December 31, 2012, the Company and the Consolidated Joint Ventures had $3.3 billion of debt outstanding, with a weighted average years to maturity of 5.3 years and weighted average interest rate of 4.38%. The following table summarizes the debt activity during the year ended and balances as of December 31, 2012 (in thousands): 
 
 
 
During the Year Ended December 31, 2012
 
 
 
Balance as of December 31, 2011
 
Debt Issuance
and Assumptions
 
Repayments
 
Other (1)
 
Balance as of
December 31, 2012
Fixed rate debt
$
1,560,068

 
$
898,906

 
$
(226,556
)
 
$
79,123

 
$
2,311,541

Variable rate debt
132,143

 
31,799

 
—

 
(79,000
)
 
84,942

Construction facilities
4,614

 
28,364

 
(5,220
)
 
—

 
27,758

Credit facility
647,750

 
1,010,000

 
(890,000
)
 
—

 
767,750

Repurchase agreements
29,409

 
80,184

 
(9,536
)
 
—

 
100,057

Total(2)
$
2,373,984

 
$
2,049,253

 
$
(1,131,312
)
 
$
123

 
$
3,292,048

________________
(1)
Represents fair value adjustment of assumed mortgage notes payable, net of amortization, of $123,000. In addition, $79.0 million of variable rate debt outstanding as of December 31, 2012 was effectively fixed through the use of an interest rate swap with an effective date of June 29, 2012.
(2)
The table above does not include loan amounts associated with certain unconsolidated joint venture arrangements of $195.8 million, of which $10.2 million is recourse to CCPT III OP. These loans mature on various dates ranging from October 2015 to July 2021.
As of December 31, 2012, the fixed rate debt includes $465.5 million of variable rate debt subject to interest rate swap agreements which had the effect of fixing the variable interest rates per annum through the maturity date of the loan. In addition, the fixed rate debt includes mortgage notes assumed with an aggregate face amount of $40.7 million and an aggregate fair value of $39.4 million at the date of assumption. The fixed rate debt has interest rates ranging from 2.75% to 6.83% per annum. The variable rate debt has variable interest rates ranging from LIBOR plus 225 basis points to 325 basis points per annum. In addition, the construction facilities have interest rates ranging from LIBOR plus 235 basis points to 250 basis points per annum, with certain debt containing LIBOR floors. The debt outstanding matures on various dates from February 2013 through January 2023. The aggregate balance of gross real estate and related assets, net of gross intangible lease liabilities, securing the fixed and variable rate debt outstanding was $4.8 billion as of December 31, 2012. Each of the mortgage notes payable is secured by the respective properties on which the debt was placed.
As of December 31, 2012, the Company had $89.8 million available for borrowing under a senior unsecured credit facility (the “Credit Facility”) based on the underlying collateral pool of $1.4 billion. The Credit Facility provides borrowings up to $857.5 million, which includes a $278.75 million term loan (the “Term Loan”) and up to $578.75 million in revolving loans (the “Revolving Loans”). The Credit Facility may be increased to a maximum of $950.0 million. Depending upon the type of loan specified and overall leverage ratio, the Revolving Loans bear interest at either LIBOR plus an interest rate spread ranging from 2.25% to 3.00% or a base rate plus an interest rate spread ranging from 1.25% to 2.00%. The base rate is greater of (1) LIBOR plus 1.00%, (2) Bank of America N.A.’s Prime Rate or (3) the Federal Funds Rate plus 0.50%. During the year ended December 31, 2011, the Company executed two swap agreements associated with the Term Loan, which had the effect of fixing the variable interest rates per annum through the maturity date of the respective loan at 3.45% and 3.15%, respectively. The Revolving Loans and Term Loan had a combined weighted average interest rate of 3.37% as of December 31, 2012.
The Repurchase Agreements have interest rates ranging from LIBOR plus 120 basis points to 175 basis points and mature on various dates from January 2013 through March 2013. Upon maturity, the Company may elect to renew the Repurchase Agreements for a period of 90 days until the CMBS mature. The CMBS have a weighted average remaining term of 9.5 years. Under the Repurchase Agreements, the lender retains the right to mark the underlying collateral to fair value. A reduction in the value of the pledged assets would require the Company to provide additional collateral to fund margin calls. As of December 31, 2012, the securities held as collateral had a fair value of $266.1 million and an amortized cost of $224.9 million. There was no cash collateral held by the counterparty as of December 31, 2012. The Repurchase Agreements are being accounted for as secured borrowings because the Company maintains effective control of the financed assets. The Repurchase Agreements are non-recourse to the Company and CCPT III OP.

F-26
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



The Credit Facility and certain notes payable contain customary affirmative, negative and financial covenants, representations, warranties and borrowing conditions. These agreements also include usual and customary events of default and remedies for facilities of this nature. Based on the Company’s analysis and review of its results of operations and financial condition, the Company believes it was in compliance with the covenants of the Credit Facility and such notes payable as of December 31, 2012.
The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt as of December 31, 2012 for each of the five succeeding fiscal years and the period thereafter:
Year Ending December 31,

Principal Repayments(1)(2)
2013
$
164,330

2014
651,232

2015
337,704

2016
169,274

2017
190,666

Thereafter
1,779,782

Total
$
3,292,988

________________
(1) Assumes the Company accepts the interest rates that one lender may reset on September 1, 2013 and February 1, 2015, respectively, related to mortgage notes payable of $30.0 million and $32.0 million, respectively.
(2) Principal payment amounts reflect actual payments based on the face amount of notes payable secured by the Company’s wholly-owned properties and Consolidated Joint Ventures. As of December 31, 2012, the fair value adjustment, net of amortization, of mortgage notes assumed was $940,000.
NOTE 12 — ACQUIRED BELOW MARKET LEASE INTANGIBLES
Acquired below market lease intangibles consisted of the following (in thousands):
 
 
 
As of December 31,
 
 
 
2012
 
2011
Acquired below market leases, net of accumulated amortization of $16,389 and $8,782,
 
 
 
 
 
respectively (with a weighted average life of 10.6 and 14.1 years, respectively)
 
$
113,607

 
$
93,050

The increase in rental and other property income resulting from the amortization of the intangible lease liability for the years ended December 31, 2012, 2011 and 2010 was $9.0 million, $5.1 million and $2.1 million, respectively.
Estimated amortization of the intangible lease liability, excluding the below market lease intangibles related to the Held for Sale Properties, as of December 31, 2012 for each of the five succeeding fiscal years is as follows (in thousands):
Year Ending December 31,
 
Amortization of Below Market Leases
2013
 
$
10,363

2014
 
$
10,106

2015
 
$
9,859

2016
 
$
9,537

2017
 
$
8,894


F-27
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



NOTE 13 — SUPPLEMENTAL CASH FLOW DISCLOSURES
Supplemental cash flow disclosures for the years ended December 31, 2012, 2011 and 2010 are as follows (in thousands):
 
Year Ended December 31,
 
2012
 
2011
 
2010
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
 
 
 
 
 
Distributions declared and unpaid
$
26,399

 
$
20,858

 
$
14,448

Fair value of mortgage notes assumed in real estate acquisitions at date of assumption
$
24,000

 
$
4,863

 
$
10,577

Common stock issued through distribution reinvestment plan
$
169,079

 
$
110,093

 
$
65,174

Net unrealized loss on interest rate swaps
$
(6,217
)
 
$
(18,904
)
 
$
(7,035
)
Unrealized gain on marketable securities
$
53,664

 
$
1,335

 
$
—

Earnout liabilities recorded upon property acquisitions
$
6,460

 
$
5,519

 
$
—

Accrued expenditures
$
10,667

 
$
2,864

 
$
1,743

Notes payable assumed by buyer in real estate disposition
$
24,250

 
$
—

 
$
—

Supplemental Cash Flow Disclosures:
 
 
 
 
 
Interest paid, net of capitalized interest of $299, $48 and $26, respectively
$
121,211

 
$
75,945

 
$
20,627

 
NOTE 14— COMMITMENTS AND CONTINGENCIES
Litigation
In the ordinary course of business, the Company may become subject to litigation or claims. As of December 31, 2012, the Company was not aware of any pending legal proceedings of which the outcome is reasonably possible to have a material effect on its results of operations, financial condition or liquidity.
Purchase Commitments
As of December 31, 2012, the Company owned one land parcel, upon which an office building is being developed. Based on budgeted construction costs, the cost to complete the facility is estimated to be $45.8 million. The construction is being funded by a construction loan facility totaling $33.8 million. As of December 31, 2012, the Company had incurred $40.2 million in construction costs and $19.9 million was outstanding under the construction facility. Additionally, the Company had properties subject to earnout provisions obligating it to pay additional consideration to the seller contingent on the future leasing and occupancy of vacant space at the properties, as discussed in Note 4 to these consolidated financial statements.
Environmental Matters
In connection with the ownership and operation of real estate, the Company potentially may be liable for costs and damages related to environmental matters. The Company owns certain properties that are subject to environmental remediation. In each case, the seller of the property, the tenant of the property and/or another third party has been identified as the responsible party for environmental remediation costs related to the respective property. Additionally, in connection with the purchase of certain of the properties, the respective sellers and/or tenants have indemnified the Company against future remediation costs. In addition, the Company carries environmental liability insurance on its properties that provides limited coverage for remediation liability and pollution liability for third-party bodily injury and property damage claims. Accordingly, the Company does not believe that it is reasonably possible that the environmental matters identified at such properties will have a material effect on its results of operations, financial condition or liquidity, nor is it aware of any environmental matters at other properties which it believes are reasonably possible to have a material effect on its results of operations, financial condition or liquidity.

F-28
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



NOTE 15 — RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS
The Company has incurred commissions, fees and expenses payable to CR III Advisors or its affiliates in connection with the Offerings, and has incurred and will continue to incur commissions, fees and expenses in connection with the acquisition, management and sale of the assets of the Company.
Offerings
In connection with the Initial Offering and Follow-on Offering, Cole Capital Corporation (“Cole Capital”), the Company’s dealer manager, which is affiliated with our advisor, received a selling commission of up to 7% of gross offering proceeds, before reallowance of commissions earned by participating broker-dealers. Cole Capital reallowed 100% of selling commissions earned to participating broker-dealers. In addition, Cole Capital received 2% of gross offering proceeds, before reallowance to participating broker-dealers, as a dealer manager fee in connection with the Initial Offering and Follow-on Offering. Cole Capital, in its sole discretion, reallowed a portion of its dealer manager fee to such participating broker-dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares sold by such participating broker-dealers and the amount of marketing support provided by such participating broker-dealers. No selling commissions or dealer manager fees were paid to Cole Capital or any other broker-dealers with respect to shares sold under the Company’s DRIP.
All other organization and offering expenses associated with the sale of the Company’s common stock (excluding selling commissions and the dealer manager fee) were paid by CR III Advisors or its affiliates and were reimbursed by the Company up to 1.5% of aggregate gross offering proceeds. A portion of the other organization and offering expenses may be underwriting compensation.
The Company recorded commissions, fees and expense reimbursements as shown in the table below for services provided by CR III Advisors and its affiliates related to the services described above during the years indicated (in thousands):
 
 
Year Ended December 31,
 
 
2012
 
2011
 
2010
Offering:
 
 
 
 
 
 
Selling commissions
 
$
56,264

 
$
88,660

 
$
98,980

Selling commissions reallowed by Cole Capital
 
$
56,264

 
$
88,660

 
$
98,980

Dealer manager fee
 
$
16,662

 
$
25,890

 
$
28,773

Dealer manager fee reallowed by Cole Capital
 
$
8,446

 
$
13,089

 
$
14,485

Other organization and offering expenses
 
$
13,188

 
$
21,572

 
$
14,013

Acquisitions and Operations
CR III Advisors or its affiliates also receive acquisition and advisory fees of up to 2% of the contract purchase price of each asset for the acquisition, development or construction of properties and will be reimbursed for acquisition expenses incurred in the process of acquiring properties, so long as the total acquisition fees and expenses relating to the transaction does not exceed 6% of the contract purchase price.
The Company paid, and expects to continue to pay, CR III Advisors a monthly asset management fee of 0.0417%, which is one-twelfth of 0.5%, of the Company’s average invested assets for that month (the “Asset Management Fee”). The Company will reimburse costs and expenses incurred by CR III Advisors in providing asset management services.
The Company paid, and expects to continue to pay, Cole Realty Advisors, Inc. (“Cole Realty Advisors”), its property manager, which is affiliated with our advisor, fees for the management and leasing of the Company’s properties. Property management fees are up to 2% of gross revenue for single-tenant properties and 4% of gross revenue for multi-tenant properties and leasing commissions will be at prevailing market rates; provided however, that the aggregate of all property management and leasing fees paid to affiliates of our advisor plus all payments to third parties will not exceed the amount that other nonaffiliated management and leasing companies generally charge for similar services in the same geographic location. Cole Realty Advisors may subcontract its duties for a fee that may be less than the fee provided for in the property management agreement. The Company reimburses Cole Realty Advisors’ costs of managing and leasing the properties. 

F-29
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



The Company reimburses CR III Advisors for all expenses it paid or incurred in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse CR III Advisors for any amount by which its operating expenses (including the Asset Management Fee) at the end of the four preceding fiscal quarters exceeds the greater of (1) 2% of average invested assets, or (2) 25% of net income other than any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of assets for that period, unless the Company’s independent directors find that a higher level of expense is justified for that year based on unusual and non-recurring factors. The Company will not reimburse CR III Advisors for personnel costs in connection with services for which CR III Advisors receives acquisition fees and real estate commissions.
If CR III Advisors, or its affiliates, provides substantial services, as determined by the independent directors, in connection with the origination or refinancing of any debt financing obtained by the Company that is used to acquire properties or to make other permitted investments, or that is assumed, directly or indirectly, in connection with the acquisition of properties, the Company will pay CR III Advisors or its affiliates a financing coordination fee equal to 1% of the amount available and/or outstanding under such financing; provided however, that CR III Advisors or its affiliates shall not be entitled to a financing coordination fee in connection with the refinancing of any loan secured by any particular property that was previously subject to a refinancing in which CR III Advisors or its affiliates received such a fee. Financing coordination fees payable from loan proceeds from permanent financing will be paid to CR III Advisors or its affiliates as the Company acquires and/or assumes such permanent financing. With respect to any revolving line of credit, no financing coordination fees will be paid on loan proceeds from any line of credit unless all net offering proceeds received as of the date proceeds from the line of credit are drawn for the purpose of acquiring assets have been invested. In addition, with respect to any revolving line of credit, CR III Advisors or its affiliates will receive financing coordination fees only in connection with amounts being drawn for the first time and not upon any re-drawing of amounts that had been repaid by the Company.
The Company recorded fees and expense reimbursements as shown in the table below for services provided by CR III Advisors and its affiliates related to the services described above during the years indicated (in thousands):
 
 
Year Ended December 31,
 
 
2012
 
2011
 
2010
Acquisitions and Operations:
 
 
 
 
 
 
Acquisition fees and expenses
 
$
50,615

 
$
49,888

 
$
48,802

Asset management fees and expenses
 
$
32,416

 
$
20,317

 
$
8,187

Property management and leasing fees and expenses
 
$
14,876

 
$
9,437

 
$
3,811

Operating expenses
 
$
3,193

 
$
2,324

 
$
1,642

Financing coordination fees
 
$
11,078

 
$
14,920

 
$
9,512

Liquidation/Listing
If CR III Advisors, or its affiliates, provides a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of one or more properties, the Company will pay CR III Advisors or its affiliates up to one-half of the brokerage commission paid, but in no event to exceed an amount equal to 3% of the sales price of each property sold. In no event will the combined real estate commission paid to CR III Advisors, its affiliates and unaffiliated third parties exceed 6% of the contract sales price. In addition, after investors have received a return of their net capital contributions and an 8% cumulative, non-compounded annual return, then CR III Advisors is entitled to receive 15% of the remaining net sale proceeds.
Upon listing of the Company’s common stock on a national securities exchange, a fee equal to 15% of the amount by which the market value of the Company’s outstanding stock plus all distributions paid by the Company prior to listing, exceeds the sum of the total amount of capital raised from investors and the amount of cash flow necessary to generate an 8% cumulative, non-compounded annual return to investors will be paid to CR III Advisors (the “Subordinated Incentive Listing Fee”). However, Holdings has agreed, as part of the Merger, to a 25% reduction from the amount payable under the advisory agreement as a result of a listing of the Company’s common stock.

F-30
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Upon termination of the advisory agreement with CR III Advisors, other than termination by the Company because of a material breach of the advisory agreement by CR III Advisors, a performance fee of 15% of the amount, if any, by which the appraised asset value at the time of such termination plus total distributions paid to stockholders through the termination date exceeds the aggregate capital contribution contributed by investors less distributions from sale proceeds plus payment to investors of an 8% annual, cumulative, non-compounded return on capital. No subordinated performance fee will be paid to the extent that the Company has already paid or become obligated to pay CR III Advisors a subordinated participation in net sale proceeds or the Subordinated Incentive Listing Fee.
During the years ended December 31, 2012 and 2011, no commissions or fees were incurred for services provided by CR III Advisors and its affiliates related to the services described above.
Due to Affiliates
As of December 31, 2012, $4.5 million had been incurred primarily for services relating to the management of the Company’s properties by CR III Advisors and its affiliates, but had not yet been reimbursed by the Company and were included in due to affiliates on the consolidated balance sheets. As of December 31, 2011, $4.8 million had been incurred primarily for other organization and offering, operating and acquisition expenses, by CR III Advisors and its affiliates, but had not yet been reimbursed by the Company and were included in due to affiliates on the consolidated balance sheets.
Transactions
On March 5, 2012, we entered in the Merger Agreement. See Note 2 for a further explanation of the Merger.
NOTE 16 — ECONOMIC DEPENDENCY
Under various agreements, the Company has engaged or will engage CR III Advisors and its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale of shares of the Company’s common stock available for issuance, as well as other administrative responsibilities for the Company including accounting services and investor relations. As a result of these relationships, the Company is dependent upon CR III Advisors and its affiliates. In the event that these companies are unable to provide the Company with these services, the Company would be required to find alternative providers of these services.
NOTE 17 — STOCKHOLDERS’ EQUITY
Distribution Reinvestment Plan
Pursuant to the DRIP, the Company allows stockholders of its common stock to elect to have the distributions the stockholders receive reinvested in additional shares of the Company’s common stock. The purchase price per share under the amended and restated DRIP will be $9.50 per share until the Company’s board of directors determines a reasonable estimate of the value of the Company’s shares. Thereafter, the purchase price per share under the Company’s DRIP will be the most recently disclosed per share value as determined in accordance with the Company’s valuation policy. No sales commissions or dealer manager fees will be paid on shares sold under the DRIP. The Company’s board of directors may terminate or amend the DRIP at the Company’s discretion at any time upon 10 days prior written notice to the stockholders. During the years ended December 31, 2012 and 2011, approximately 17.8 million shares and approximately 11.6 million shares were purchased under the DRIP for $169.1 million and $110.1 million, respectively, which were recorded as redeemable common stock on the consolidated balance sheets, net of redemptions paid of $68.6 million and $41.9 million, respectively. The Company will continue to issue shares of common stock under the DRIP Offering until such time as the Company’s shares are listed on a national securities exchange or the DRIP Offering is otherwise terminated by the Company’s board of directors.

F-31
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Share Redemption Program
The Company’s share redemption program permits its stockholders to sell their shares back to the Company after they have held them for at least one year, subject to the significant conditions and limitations described below.
There are several restrictions on a stockholder’s ability to sell their shares to the Company under the program. The stockholders generally have to hold their shares for one year in order to participate in the program; however, the Company may waive the one year holding period in the event of the death or bankruptcy of a stockholder. In addition, the Company will limit the number of shares redeemed pursuant to the Company’s share redemption program as follows: (1) the redemptions are limited to 5% of the weighted average number of shares outstanding during the trailing twelve months prior to the end of the fiscal quarter for which redemptions are being paid (the “Trailing Twelve-month Cap”) (provided, however, that while shares subject to a redemption requested upon death of a stockholder will be included in calculating the maximum number of shares that may be redeemed, such shares will not be subject to the Trailing Twelve-month Cap); and (2) funding for the redemption of shares will be limited to the net proceeds the Company receives from the sale of shares under the DRIP. In an effort to accommodate redemption requests throughout the calendar year, the Company limits quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing twelve-month period ending on the last day of the fiscal quarter, and funding for redemptions for each quarter generally will be limited to the net proceeds the Company receives from the sale of shares in the respective quarter under the DRIP (provided, however, that while shares subject to a redemption requested upon the death of a stockholder will be included in calculating the maximum number of shares that may be redeemed, such shares will not be subject to the quarterly percentage caps); however, the Company’s board of directors may waive these quarterly limitations in its sole discretion, subject to the Trailing Twelve-month Cap. During the term of the Offering and until such time as the Company’s board of directors determines a reasonable estimate of the value of the Company’s shares, the redemption price per share (other than for shares purchased pursuant to the DRIP) will depend on the length of time the stockholder has held such shares as follows: after one year from the purchase date—95% of the amount the stockholder paid for each share; after two years from the purchase date—97.5% of the amount the stockholder paid for each share; after three years from the purchase date—100% of the amount the stockholder paid for each share. During this time period, the redemption price for shares purchased pursuant to the DRIP will be the amount paid for such shares.
Upon receipt of a request for redemption, the Company may conduct a Uniform Commercial Code search to ensure that no liens are held against the shares. The Company’s share redemption program provides that repurchases will be made no later than the end of the month following the end of each fiscal quarter. If the Company cannot purchase all shares presented for redemption in any fiscal quarter, it will give priority to the redemption of deceased stockholders’ shares. The Company next will give priority to requests for full redemption of accounts with a balance of 250 shares or less at the time the Company receives the request, in order to reduce the expense of maintaining small accounts. Thereafter, the Company will honor the remaining redemption requests on a pro rata basis. The Company’s board of directors may amend, suspend or terminate the share redemption program at any time upon 30 days prior written notice to the stockholders. During the years ended December 31, 2012 and 2011, the Company redeemed approximately 7.0 million and approximately 4.3 million shares under the share redemption program for $68.6 million and $41.9 million, respectively.
NOTE 18 — INCOME TAXES
For federal income tax purposes, distributions to stockholders are characterized as ordinary dividends, capital gain distributions, or nontaxable distributions. Nontaxable distributions will reduce U.S. stockholders’ basis (but not below zero) in their shares. The following table shows the character of distributions the Company paid on a percentage basis during the years ended December 31, 2012, 2011 and 2010.
 
 
Year Ended December 31,
Character of Distributions (unaudited):
 
2012
 
2011
 
2010
Ordinary dividends
 
52
%
 
61
%
 
55
%
Capital gain distributions
 
15
%
 
—
%
 
—
%
Nontaxable distributions
 
33
%
 
39
%
 
45
%
Total
 
100
%
 
100
%
 
100
%
As of December 31, 2012, the tax basis carrying value of the Company’s land and depreciable real estate assets was $6.7 billion. During the years ended December 31, 2012, 2011 and 2010, the Company incurred state and local income and franchise taxes of $1.8 million, $1.3 million and $780,000, respectively, which were recorded in general and administrative expenses on the consolidated statements of operations.

F-32
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



NOTE 19 — OPERATING LEASES
The Company’s properties are leased to tenants under operating leases for which the terms and expirations vary. The leases frequently have provisions to extend the lease agreement and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. As of December 31, 2012, the weighted average remaining lease term, including the Consolidated Joint Ventures’ leases, was 12.7 years.
The future minimum rental income from the Company’s investment in real estate assets under non-cancelable operating leases, excluding the operating leases related to the Held for Sale Properties, as of December 31, 2012 is as follows (in thousands):
Year Ending December 31,
 
Amount
2013
 
$
560,733

2014
 
554,263

2015
 
549,491

2016
 
535,888

2017
 
523,321

Thereafter
 
4,411,626

Total
 
$
7,135,322

NOTE 20 — QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial information for the years ended December 31, 2012 and 2011 (in thousands, except for per share amounts). In the opinion of management, the information for the interim periods presented includes all adjustments which are of a normal and recurring nature, necessary to present a fair presentation of the results for each period. In addition, the Company has adjusted the information for discontinued operations.
 
 
2012
 
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Revenues
 
$
114,175

 
$
132,591

 
$
143,529

 
$
152,647

 
Operating income
 
$
41,205

 
$
49,216

 
$
59,768

 
$
58,695

 
Net income
 
$
35,950

 
$
23,090

 
$
18,570

 
$
125,828

(2) 
Net income attributable to the Company
 
$
35,937

 
$
23,223

 
$
18,567

 
$
125,611

(2) 
Basic and diluted net income per common share (1)
 
$
0.08

 
$
0.05

 
$
0.04

 
$
0.27

 
Basic and diluted net income attributable to the Company per common share (1)
 
$
0.08

 
$
0.05

 
$
0.04

 
$
0.27

 
Distributions declared per common share
 
$
0.16

 
$
0.16

 
$
0.16

 
$
0.16

 
________________
(1) Based on the weighted average number of shares outstanding as of December 31, 2012.
(2) Net income for the fourth quarter of 2012 includes a gain on sale of marketable securities of $12.5 million and a gain on sale of real estate of $108.5 million.

F-33
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



 
 
2011
 
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Revenues
 
$
61,312

 
$
70,944

 
$
86,912

 
$
104,812

 
Operating income
 
$
23,750

 
$
23,724

 
$
19,560

 
$
41,833

 
Net income
 
$
14,548

 
$
10,491

 
$
1,282

 
$
19,450

 
Net income attributable to the Company
 
$
14,260

 
$
10,480

 
$
1,271

 
$
19,285

 
Basic and diluted net income per common share (1)
 
$
0.05

 
$
0.03

 
$
0.00


$
0.07

 
Basic and diluted net income attributable to the Company per common share (1)
 
$
0.05

 
$
0.03

 
$
0.00

 
$
0.07

 
Distributions declared per common share
 
$
0.16

 
$
0.16

 
$
0.16

 
$
0.17

 
________________
(1) Based on the weighted average number of shares outstanding as of December 31, 2011.
NOTE 21 — SUBSEQUENT EVENTS
Issuance of Shares of Common Stock in the DRIP Offering
The Company continues to issue shares of common stock under the DRIP Offering. As of March 26, 2013, the Company had issued, approximately 17.0 million shares pursuant to the DRIP Offering, resulting in gross proceeds to the Company of $161.8 million.
Redemption of Shares of Common Stock
Subsequent to December 31, 2012, the Company redeemed approximately 2.8 million shares for $27.8 million at an average price per share of $9.80.
Entry into the Merger Agreement
Subsequent to December 31, 2012, the Company entered into the Merger Agreement, as discussed in Note 2 to these consolidated financial statements.
Entry into Employment Agreements with Key Personnel
Subsequent to December 31, 2012, we, along with CCPT III OP, entered into employment agreements with each of Christopher H. Cole and Marc T. Nemer, to become effective as of the date of consummation of the Merger. The amounts to be paid pursuant to the employment agreements are for future services to be rendered to the Company and are not part of the Merger consideration. Under Mr. Cole’s employment agreement, upon the consummation of the Merger, Mr. Cole, the current chairman of the Board and chief executive officer and president of the Company, will serve as executive chairman of the Board, reporting to the Board, and will no longer serve as the chief executive officer and president of the Company. Under Mr. Nemer’s employment agreement, upon the consummation of the Merger, Mr. Nemer, a current director of the Company, will continue to be a director and will assume the positions of chief executive officer and president of the Company. The employment agreements provide the executives with compensation for their services rendered after the consummation of the Merger and provide incentives to reward outstanding future performance. The term of each employment agreement ends on December 31, 2016 and will be automatically renewed for annual terms thereafter unless earlier terminated by the Company or the executive.

F-34
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Legal Proceedings
In connection with the Merger, on March 20, 2013, a putative class action and derivative lawsuit was filed in the Circuit Court for Baltimore City, Maryland against and purportedly on behalf of the Company captioned Strub, et al. v. Cole Holdings Corporation, et al. (“Strub”). The complaint names as defendants Holdings; CR III Advisors; Merger Sub; Cole Capital Advisors, Inc., Equity Fund Advisors, Inc. (an affiliate of Holdings), Cole Capital, and Cole Realty Advisors, Inc. (together, “Cole Holding Entities”); each of the directors of the Company; and the Company. Strub alleges that the defendants breached their fiduciary duties and duties of loyalty, candor and due care by causing the Company to enter into the Merger Agreement, failing to implement appropriate measures to ensure that the Company’s relationship with CR III Advisors did not become a vehicle for wrongful self-dealing, failing to consider and explore strategic alternatives to the Merger, failing to seek stockholder approval for the Merger, and by engaging in self-interested and otherwise conflicted actions. It also alleges that the Merger Sub and Cole Holdings Entities aided and abetted those breaches of fiduciary duty, and that Messrs. Cole and Nemer will be unjustly enriched by and following the Merger. Strub seeks a declaration that the conduct of the defendants is a breach of fiduciary duty or aiding and abetting such breaches and that the Merger Agreement is null and void; an order requiring stockholder approval of any acquisition of CR III Advisors or any Cole Holdings Entities; awarding damages and restitution, and disgorgement by each director; an award of plaintiffs’ reasonable attorneys’ fees, expert fees, interest, and cost of suit, and other relief. On March 28, 2013, Strub sought an injunction against the Merger closing until stockholder approval is obtained. The defendants intend to oppose that application.
In addition, on March 25, 2013, a putative class action lawsuit was filed in the Circuit Court for Baltimore City, Maryland captioned Rodgers v. Cole Credit Property Trust III, et al. (“Rodgers”). This complaint names as defendants the Company; Cole REIT III Operating Partnership, LP (“CCPT III OP”); CR III Advisors; Merger Sub; and each of the Company’s directors. Rodgers alleges that the Company’s directors breached their fiduciary duties by entering into the Merger Agreement, failing to provide transparency and a stockholder vote, structuring the transaction to prevent other potential buyers from buying the Company, and failing to disclose to stockholders a third party’s interest in acquiring the Company. It also alleges that CR III Advisors breached its fiduciary duty by ignoring and failing to disclose a third party offer; and that the Company, CCPT III OP, Merger Sub, and the directors aided and abetted the alleged breach of fiduciary duty by CR III Advisors. Rodgers seeks a declaration that the defendants have committed a gross abuse of trust and have breached and/or aided and abetted breach of fiduciary duties; that the Merger is therefore unlawful and unenforceable, and that the Merger and any related agreements should be rescinded and invalidated; declaring that the Merger and Merger Agreement should be rescinded and parties restored to their original position; imposing a constructive trust in favor of the plaintiff and class on any benefits, property or value improperly received by, traceable to, or in possession of defendants as a result of wrongful conduct; enjoining defendants from consummating the Merger until the Company has a process to obtain a merger agreement providing best possible terms to stockholders; rescinding the Merger to the extent implemented or granting rescissory damages; directing the directors to account to plaintiff and class for damages as a result of their wrongdoing; awarding compensatory damages and interest; awarding costs, including reasonable attorneys’ and experts’ fees; and granting further equitable relief that is deemed just and proper.
The outcome of these matters cannot be predicted at this time and no provisions for losses, if any, have been recorded in the accompanying consolidated financial statements.
Unsolicited Proposal
On March 19, 2013, the Company’s board of directors received an unsolicited proposal from American Realty Capital Properties, Inc. (“ARCP”) to acquire the Company for a combination of cash and shares of ARCP common stock. The special committee of the Company’s board of directors, which consists of all of the independent directors of the Company (the “Special Committee”), reviewed the unsolicited proposal from ARCP and determined that the proposed sale to ARCP would not be in the best interests of the Company and its stockholders. Further, the Special Committee affirmed its commitment to the Merger.
On March 27, 2013, the Company’s board of directors received a revised unsolicited proposal from ARCP to acquire the Company after the Merger, for a combination of cash and shares of ARCP common stock. The Special Committee is currently reviewing the revised proposal from ARCP.

F-35
COLE CREDIT PROPERTY TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Investment in Real Estate and Related Assets
Subsequent to December 31, 2012, the Company acquired a 100% interest in nine commercial real estate properties for an aggregate purchase price of $25.3 million. The acquisitions were funded with net proceeds from the DRIP Offering and the sale of properties and other investments. The Company has not completed its initial purchase price allocations with respect to these properties and therefore cannot provide similar disclosures to those included in Note 5 to these consolidated financial statements for these properties.
Property Dispositions
Subsequent to December 31, 2012, the Company sold the Held for Sale Properties discussed in Note 9 to these consolidated financial statements for an aggregate sales price of $21.3 million, exclusive of closing costs. In addition, the Company sold eight additional properties for an aggregate sales price of $34.0 million, exclusive of closing costs. The purchase price of each property sold subsequent to December 31, 2012 was greater than the respective book value of each property. As of December 31, 2012 the potential buyers of these eight properties either had not been identified or there had not been a binding purchase and sale agreement entered into for the sale of these properties. Therefore, the Company believes that the sale of these properties was not considered to be probable, as such, the requirements under GAAP to treat the properties as held for sale were not met as of December 31, 2012.
Notes Payable and Other Borrowings
Subsequent to December 31, 2012, the Company entered into a loan agreement for $74.3 million secured by a commercial property with a purchase price of $135.0 million. In addition, the Company repaid $13.2 million of debt outstanding and $160.0 million under the Credit Facility. As of March 26, 2013, the Company had $23.1 million outstanding under the construction facilities and $607.8 million outstanding under the Credit Facility.


F-36

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Real Estate Held for Investment the Company has Invested in Under Operating Leases
Aaron Rents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Auburndale, FL
 
$
2,647

 
$
1,224

 
$
3,478

 
$
1,273

 
$
5,975

 
$
307

 
3/31/2010
 
2009
 
Battle Creek, MI
 
407

 
228

 
485

 
—

 
713

 
49

 
6/18/2009
 
1956
 
Benton Harbor, MI
 
401

 
261

 
385

 
—

 
646

 
39

 
6/30/2009
 
1973
 
Bloomsburg, PA
 
400

 
152

 
770

 
—

 
922

 
66

 
3/31/2010
 
2009
 
Bowling Green, OH
 
564

 
154

 
805

 
—

 
959

 
66

 
3/31/2010
 
2009
 
Charlotte, NC
 
579

 
279

 
714

 
—

 
993

 
54

 
3/31/2010
 
1994
 
Chattanooga, TN
 
490

 
587

 
384

 
—

 
971

 
37

 
6/18/2009
 
1989
 
Columbia, SC
 
556

 
549

 
473

 
—

 
1,022

 
46

 
6/18/2009
 
1977
 
Copperas Cove, TX
 
668

 
304

 
964

 
—

 
1,268

 
90

 
6/30/2009
 
2007
 
El Dorado, AR
 
356

 
208

 
456

 
—

 
664

 
43

 
6/30/2009
 
2000
 
Haltom City, TX
 
752

 
258

 
1,185

 
—

 
1,443

 
107

 
6/30/2009
 
2008
 
Humble, TX
 
663

 
430

 
734

 
—

 
1,164

 
69

 
5/29/2009
 
2008
 
Indianapolis, IN
 
436

 
170

 
654

 
—

 
824

 
64

 
5/29/2009
 
1998
 
Kennett, MO
 
319

 
165

 
406

 
—

 
571

 
31

 
3/31/2010
 
1999
 
Kent, OH
 
614

 
356

 
1,138

 
—

 
1,494

 
116

 
3/31/2010
 
1999
 
Killeen , TX
 
1,558

 
608

 
2,241

 
—

 
2,849

 
213

 
6/18/2009
 
1981
 
Kingsville, TX
 
599

 
369

 
770

 
—

 
1,139

 
56

 
3/31/2010
 
2009
 
Lafayette, IN
 
550

 
249

 
735

 
—

 
984

 
54

 
3/31/2010
 
1990
 
Livingston, TX
 
645

 
131

 
1,052

 
—

 
1,183

 
96

 
6/18/2009
 
2008
 
Magnolia, MS
 
1,473

 
209

 
2,393

 
—

 
2,602

 
208

 
3/31/2010
 
2000
 
Mansura, LA
 
254

 
54

 
417

 
(10
)
 
461

 
39

 
6/18/2009
 
2000
 
Marion, SC
 
319

 
82

 
484

 
—

 
566

 
35

 
3/31/2010
 
1998
 
Meadville, PA
 
512

 
168

 
841

 
—

 
1,009

 
91

 
5/29/2009
 
1994
 
Mexia, TX
 
490

 
114

 
813

 
—

 
927

 
76

 
5/29/2009
 
2007
 
Minden, LA
 
645

 
252

 
831

 
—

 
1,083

 
78

 
5/29/2009
 
2008
 
Mission, TX
 
549

 
347

 
694

 
—

 
1,041

 
51

 
3/31/2010
 
2009
 
North Olmsted, OH
 
449

 
151

 
535

 
—

 
686

 
46

 
3/31/2010
 
1960
 
Odessa, TX
 
356

 
67

 
567

 
—

 
634

 
53

 
5/29/2009
 
2006
 
Oneonta, AL
 
614

 
218

 
792

 
—

 
1,010

 
66

 
3/31/2010
 
2008
 
Oxford , AL
 
356

 
263

 
389

 
—

 
652

 
37

 
5/29/2009
 
1989
 
Pasadena, TX
 
659

 
377

 
787

 
—

 
1,164

 
72

 
6/18/2009
 
2009
 
Pensacola, FL
 
347

 
263

 
423

 
—

 
686

 
43

 
6/30/2009
 
1979
 
Port Lavaca, TX
 
534

 
128

 
894

 
—

 
1,022

 
81

 
6/30/2009
 
2007
 
Redford, MI
 
434

 
215

 
477

 
—

 
692

 
42

 
3/31/2010
 
1972
 
Richmond, VA
 
774

 
419

 
1,032

 
—

 
1,451

 
94

 
6/30/2009
 
1988
 
Shawnee, OK
 
588

 
428

 
634

 
—

 
1,062

 
60

 
5/29/2009
 
2008
 
Springdale, AR
 
624

 
500

 
655

 
—

 
1,155

 
50

 
3/31/2010
 
2009
 
Statesboro, GA
 
579

 
311

 
734

 
—

 
1,045

 
67

 
6/18/2009
 
2008
 
Texas City, TX
 
895

 
294

 
1,311

 
—

 
1,605

 
115

 
8/31/2009
 
1991
 
Valley, AL
 
409

 
139

 
569

 
—

 
708

 
48

 
3/31/2010
 
2009
Academy Sports
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Austin, TX
 
5,044

 
3,699

 
4,930

 
—

 
8,629

 
305

 
8/26/2010
 
1988
 
Bossier City, LA
 
3,806

 
1,920

 
5,410

 
—

 
7,330

 
495

 
6/19/2009
 
2008
 
Fort Worth, TX
 
3,414

 
1,871

 
4,117

 
—

 
5,988

 
377

 
6/19/2009
 
2009
 
Killeen, TX
 
3,320

 
1,227

 
4,716

 
—

 
5,943

 
340

 
4/29/2010
 
2009
 
Laredo, TX
 
3,961

 
2,133

 
4,839

 
—

 
6,972

 
440

 
6/19/2009
 
2008
 
Montgomery, AL
 
 (f)

 
1,290

 
5,644

 
—

 
6,934

 
526

 
6/19/2009
 
2009
Advanced Auto
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Appleton, WI
 
 (f)

 
393

 
904

 
—

 
1,297

 
55

 
9/30/2010
 
2007
 
Bedford, IN
 
760

 
71

 
1,056

 
—

 
1,127

 
55

 
1/4/2011
 
2007
 
Bethel, OH
 
730

 
276

 
889

 
—

 
1,165

 
58

 
12/22/2010
 
2008

S-1

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Advanced Auto (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bonita Springs, FL
 
$
1,561

 
$
1,094

 
$
1,134

 
$
—

 
$
2,228

 
$
69

 
9/22/2010
 
2007
 
Brownstown, MI
 
 (f)

 
771

 
924

 
—

 
1,695

 
33

 
9/23/2011
 
2008
 
Candler, NC
 
—

 
343

 
1,007

 
—

 
1,350

 
8

 
9/28/2012
 
2012
 
Canton, OH
 
660

 
343

 
870

 
—

 
1,213

 
65

 
3/31/2010
 
2007
 
Charlotte, NC
 
 (f)

 
395

 
749

 
—

 
1,144

 
32

 
5/12/2011
 
2001
 
Crestwood, KY
 
1,030

 
374

 
1,015

 
—

 
1,389

 
55

 
12/22/2010
 
2009
 
Dayton, OH
 
—

 
605

 
918

 
—

 
1,523

 
15

 
6/21/2012
 
2007
 
Deer Park, TX
 
739

 
219

 
1,131

 
—

 
1,350

 
87

 
12/16/2009
 
2008
 
Delaware, OH
 
730

 
467

 
906

 
—

 
1,373

 
72

 
3/31/2010
 
2008
 
Florence, KY
 
—

 
599

 
966

 
—

 
1,565

 
16

 
6/21/2012
 
2008
 
Frankfort, KY
 
 (f)

 
660

 
786

 
—

 
1,446

 
13

 
5/15/2012
 
2007
 
Franklin, IN
 
738

 
384

 
918

 
—

 
1,302

 
57

 
8/12/2010
 
2010
 
Georgetown, KY
 
—

 
511

 
892

 
—

 
1,403

 
15

 
5/15/2012
 
2007
 
Grand Rapids, MI
 
657

 
344

 
656

 
—

 
1,000

 
42

 
8/12/2010
 
2008
 
Hillview, KY
 
740

 
302

 
889

 
—

 
1,191

 
48

 
12/22/2010
 
2009
 
Holland, OH
 
668

 
126

 
1,050

 
—

 
1,176

 
77

 
3/31/2010
 
2008
 
Houston (Aldine), TX
 
690

 
190

 
1,072

 
—

 
1,262

 
83

 
12/16/2009
 
2006
 
Houston (Imperial), TX
 
623

 
139

 
995

 
—

 
1,134

 
77

 
12/16/2009
 
2008
 
Houston (Wallisville), TX
 
757

 
140

 
1,245

 
—

 
1,385

 
96

 
12/16/2009
 
2008
 
Howell, MI
 
830

 
639

 
833

 
—

 
1,472

 
47

 
12/20/2010
 
2008
 
Humble, TX
 
757

 
292

 
1,086

 
—

 
1,378

 
84

 
12/16/2009
 
2007
 
Huntsville, TX
 
619

 
134

 
1,046

 
—

 
1,180

 
81

 
12/16/2009
 
2008
 
Janesville, WI
 
939

 
277

 
1,209

 
—

 
1,486

 
73

 
9/30/2010
 
2007
 
Kingwood, TX
 
743

 
183

 
1,183

 
—

 
1,366

 
91

 
12/16/2009
 
2009
 
Lehigh Acres, FL
 
1,425

 
582

 
1,441

 
—

 
2,023

 
77

 
12/21/2010
 
2008
 
Lubbock, TX
 
579

 
88

 
1,012

 
—

 
1,100

 
78

 
12/16/2009
 
2008
 
Massillon, OH
 
 (f)

 
270

 
1,210

 
—

 
1,480

 
50

 
6/21/2011
 
2007
 
Milwaukee, WI
 
 (f)

 
507

 
1,107

 
—

 
1,614

 
45

 
6/10/2011
 
2008
 
Mishawaka, IN
 
—

 
510

 
1,009

 
—

 
1,519

 
14

 
6/21/2012
 
2007
 
Monroe, MI
 
 (f)

 
599

 
846

 
—

 
1,445

 
36

 
6/21/2011
 
2007
 
Richmond, IN
 
—

 
365

 
1,379

 
—

 
1,744

 
21

 
6/21/2012
 
2006
 
Rock Hill, SC
 
 (f)

 
345

 
589

 
—

 
934

 
24

 
5/12/2011
 
1995
 
Romulus, MI
 
 (f)

 
537

 
1,021

 
—

 
1,558

 
37

 
9/23/2011
 
2007
 
Salem, OH
 
660

 
254

 
869

 
—

 
1,123

 
47

 
12/20/2010
 
2009
 
Sapulpa, OK
 
704

 
360

 
893

 
—

 
1,253

 
54

 
8/3/2010
 
2007
 
South Lyon, MI
 
 (f)

 
569

 
898

 
—

 
1,467

 
38

 
6/21/2011
 
2008
 
Spring, TX
 
—

 
409

 
1,143

 
—

 
1,552

 
17

 
6/21/2012
 
2007
 
Sylvania, OH
 
639

 
115

 
983

 
—

 
1,098

 
70

 
4/28/2010
 
2009
 
Twinsburg, OH
 
639

 
355

 
770

 
—

 
1,125

 
57

 
3/31/2010
 
2008
 
Vermillion, OH
 
 (f)

 
270

 
722

 
—

 
992

 
30

 
6/21/2011
 
2006
 
Washington Township, MI
 
 (f)

 
779

 
1,012

 
—

 
1,791

 
36

 
9/23/2011
 
2008
 
Webster, TX
 
757

 
293

 
1,089

 
—

 
1,382

 
84

 
12/16/2009
 
2008
AGCO Corporation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Duluth, GA
 
8,600

 
2,785

 
12,570

 
9

 
15,364

 
427

 
12/21/2011
 
1998
Albertson’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Abilene, TX
 
3,981

 
1,085

 
4,871

 
—

 
5,956

 
276

 
10/26/2010
 
2010
 
Albuquerque (Academy), NM
 
4,500

 
2,257

 
5,204

 
—

 
7,461

 
353

 
10/26/2010
 
1997
 
Albuquerque (Lomas), NM
 
4,410

 
2,960

 
4,409

 
—

 
7,369

 
314

 
10/26/2010
 
2003
 
Alexandria, LA
 
4,110

 
1,428

 
5,066

 
—

 
6,494

 
287

 
10/26/2010
 
2000
 
Arlington, TX
 
4,206

 
984

 
5,732

 
—

 
6,716

 
325

 
10/26/2010
 
2002

S-2

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Albertson’s (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Baton Rouge (Airline), LA
 
$
5,425

 
$
2,200

 
$
6,003

 
$
—

 
$
8,203

 
$
340

 
10/26/2010
 
2004
 
Baton Rouge (College), LA
 
3,931

 
1,733

 
4,615

 
—

 
6,348

 
262

 
10/26/2010
 
2002
 
Baton Rouge (George), LA
 
4,731

 
2,023

 
5,273

 
—

 
7,296

 
300

 
10/26/2010
 
2003
 
Bossier City, LA
 
3,599

 
2,006

 
4,000

 
—

 
6,006

 
228

 
10/26/2010
 
2000
 
Clovis, NM
 
3,927

 
757

 
3,625

 
—

 
4,382

 
252

 
10/26/2010
 
2010
 
Denver, CO
 
3,840

 
1,858

 
5,253

 
—

 
7,111

 
296

 
10/26/2010
 
2002
 
Durango, CO
 
3,770

 
4,549

 
2,276

 
—

 
6,825

 
131

 
10/26/2010
 
1993
 
El Paso, TX
 
4,438

 
1,341

 
4,206

 
—

 
5,547

 
238

 
10/26/2010
 
2009
 
Farmington, NM
 
2,566

 
1,237

 
3,136

 
—

 
4,373

 
233

 
10/26/2010
 
2002
 
Fort Collins, CO
 
4,328

 
1,362

 
6,186

 
—

 
7,548

 
348

 
10/26/2010
 
2009
 
Fort Worth (Beach), TX
 
4,740

 
2,097

 
5,299

 
—

 
7,396

 
299

 
10/26/2010
 
2009
 
Fort Worth (Clifford), TX
 
3,149

 
1,187

 
4,089

 
—

 
5,276

 
232

 
10/26/2010
 
2002
 
Fort Worth (Oakmont), TX
 
3,553

 
1,859

 
4,200

 
—

 
6,059

 
239

 
10/26/2010
 
2000
 
Fort Worth (Sycamore), TX
 
3,840

 
962

 
5,174

 
—

 
6,136

 
293

 
10/26/2010
 
2010
 
Lafayette, LA
 
5,380

 
1,676

 
6,442

 
—

 
8,118

 
365

 
10/26/2010
 
2002
 
Lake Havasu City, AZ
 
3,552

 
1,037

 
5,361

 
—

 
6,398

 
311

 
10/26/2010
 
2003
 
Las Cruces, NM
 
 (f)

 
1,567

 
5,581

 
—

 
7,148

 
323

 
1/28/2011
 
1997
 
Los Lunas, NM
 
4,083

 
1,236

 
4,976

 
—

 
6,212

 
333

 
10/26/2010
 
2003
 
Mesa, AZ
 
3,034

 
1,739

 
3,748

 
—

 
5,487

 
228

 
9/29/2010
 
1997
 
Midland, TX
 
5,640

 
1,470

 
5,129

 
—

 
6,599

 
293

 
10/26/2010
 
2000
 
Odessa, TX
 
5,080

 
1,201

 
4,425

 
—

 
5,626

 
253

 
10/26/2010
 
2008
 
Phoenix, AZ
 
3,500

 
2,241

 
4,086

 
—

 
6,327

 
249

 
9/29/2010
 
1998
 
Scottsdale, AZ
 
5,672

 
2,932

 
7,046

 
—

 
9,978

 
407

 
10/26/2010
 
2002
 
Silver City, NM
 
3,560

 
647

 
3,987

 
—

 
4,634

 
267

 
10/26/2010
 
1995
 
Tucson (Grant), AZ
 
2,721

 
1,464

 
3,456

 
—

 
4,920

 
203

 
10/26/2010
 
1994
 
Tucson (Silverbell), AZ
 
5,430

 
2,649

 
7,001

 
—

 
9,650

 
419

 
9/29/2010
 
2000
 
Weatherford, TX
 
3,934

 
1,686

 
4,836

 
—

 
6,522

 
274

 
10/26/2010
 
2001
 
Yuma, AZ
 
4,395

 
1,320

 
6,597

 
—

 
7,917

 
379

 
10/26/2010
 
2004
Amazon
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charleston, TN
 
38,500

 
2,265

 
44,536

 
—

 
46,801

 
846

 
4/30/2012
 
2011
 
Chattanooga, TN
 
40,800

 
1,768

 
46,969

 
—

 
48,737

 
893

 
4/30/2012
 
2011
 
West Columbia, SC
 
41,900

 
3,062

 
47,338

 
—

 
50,400

 
900

 
4/30/2012
 
2012
Applebee’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adrian, MI
 
 (f)

 
312

 
1,537

 
—

 
1,849

 
87

 
10/13/2010
 
1995
 
Bartlett, TN
 
 (f)

 
674

 
874

 
—

 
1,548

 
50

 
10/13/2010
 
1990
 
Chambersburg, PA
 
 (f)

 
709

 
983

 
—

 
1,692

 
56

 
10/13/2010
 
1995
 
Elizabeth City, NC
 
 (f)

 
392

 
1,282

 
—

 
1,674

 
91

 
3/31/2010
 
1997
 
Farmington, MO
 
 (f)

 
360

 
1,483

 
—

 
1,843

 
105

 
3/31/2010
 
1999
 
Horn Lake, MS
 
 (f)

 
646

 
813

 
—

 
1,459

 
46

 
10/13/2010
 
1994
 
Joplin, MO
 
 (f)

 
578

 
1,290

 
—

 
1,868

 
92

 
3/31/2010
 
1994
 
Kalamazoo, MI
 
 (f)

 
562

 
1,288

 
—

 
1,850

 
73

 
10/13/2010
 
1994
 
Lufkin, TX
 
 (f)

 
617

 
1,106

 
—

 
1,723

 
63

 
10/13/2010
 
1998
 
Madisonville, KY
 
 (f)

 
521

 
1,166

 
—

 
1,687

 
83

 
3/31/2010
 
1997
 
Marion, IL
 
 (f)

 
429

 
1,165

 
—

 
1,594

 
83

 
3/31/2010
 
1998
 
Memphis, TN
 
 (f)

 
779

 
1,112

 
—

 
1,891

 
79

 
3/31/2010
 
1999
 
Norton, VA
 
 (f)

 
530

 
928

 
—

 
1,458

 
52

 
10/13/2010
 
2006
 
Owatonna, MN
 
 (f)

 
590

 
1,439

 
—

 
2,029

 
82

 
10/13/2010
 
1996
 
Rolla, MO
 
 (f)

 
569

 
1,370

 
—

 
1,939

 
97

 
3/31/2010
 
1997
 
Swansea, IL
 
 (f)

 
559

 
1,036

 
—

 
1,595

 
59

 
10/13/2010
 
1998

S-3

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Applebee’s (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tyler, TX
 
$ (f)

 
$
852

 
$
1,418

 
$
—

 
$
2,270

 
$
81

 
10/13/2010
 
1993
 
Vincennes, IN
 
 (f)

 
383

 
1,248

 
—

 
1,631

 
89

 
3/31/2010
 
1995
 
West Memphis, AR
 
 (f)

 
518

 
829

 
—

 
1,347

 
47

 
10/13/2010
 
2006
 
Wytheville, VA
 
 (f)

 
419

 
959

 
—

 
1,378

 
55

 
10/13/2010
 
1997
Apollo Group
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Phoenix, AZ
 
79,000

 
13,270

 
123,533

 
—

 
136,803

 
5,779

 
3/24/2011
 
2008
AT&T
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dallas, TX
 
17,350

 
887

 
24,073

 
—

 
24,960

 
2,234

 
5/28/2010
 
2001
Atascocita Commons
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Humble, TX
 
28,250

 
13,051

 
39,287

 
(7
)
 
52,331

 
2,663

 
6/29/2010
 
2008
Autozone
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Blanchester, OH
 
535

 
160

 
755

 
—

 
915

 
57

 
6/9/2010
 
2008
 
Hamilton, OH
 
814

 
610

 
760

 
—

 
1,370

 
58

 
6/9/2010
 
2008
 
Hartville, OH
 
614

 
111

 
951

 
—

 
1,062

 
68

 
7/14/2010
 
2007
 
Hernando, MS
 
—

 
111

 
712

 
—

 
823

 
10

 
6/11/2012
 
2003
 
Mount Orab, OH
 
679

 
306

 
833

 
—

 
1,139

 
62

 
6/9/2010
 
2009
 
Nashville, TN
 
861

 
441

 
979

 
—

 
1,420

 
66

 
6/9/2010
 
2009
 
Pearl River, LA
 
719

 
193

 
1,046

 
—

 
1,239

 
68

 
6/30/2010
 
2007
 
Rapid City, SD
 
571

 
365

 
839

 
—

 
1,204

 
58

 
6/30/2010
 
2008
 
Trenton, OH
 
504

 
288

 
598

 
—

 
886

 
45

 
6/9/2010
 
2008
Banner Life
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Urbana, MD
 
19,600

 
3,730

 
29,863

 
—

 
33,593

 
1,364

 
6/2/2011
 
2011
Belleview Plaza
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pensacola, FL
 
4,145

 
1,033

 
6,039

 
237

 
7,309

 
183

 
12/13/2011
 
2009
Benihana
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alpharetta, GA
 
—

 
625

 
1,033

 
—

 
1,658

 
10

 
8/21/2012
 
2003
 
Anchorage, AK
 
—

 
1,399

 
1,921

 
—

 
3,320

 
19

 
8/21/2012
 
1998
 
Dallas, TX
 
—

 
3,049

 
661

 
—

 
3,710

 
7

 
8/21/2012
 
1975
 
Farmington Hills, MI
 
—

 
1,413

 
2,699

 
—

 
4,112

 
27

 
8/21/2012
 
2012
 
Maple Grove, MN
 
—

 
1,279

 
2,419

 
—

 
3,698

 
23

 
8/21/2012
 
2006
 
North Bay Village, FL
 
—

 
2,763

 
1,015

 
—

 
3,778

 
10

 
8/21/2012
 
1972
 
Schaumburg, IL
 
—

 
1,876

 
1,275

 
—

 
3,151

 
15

 
8/21/2012
 
1992
 
Stuart, FL
 
—

 
2,059

 
1,227

 
—

 
3,286

 
12

 
8/21/2012
 
1976
 
Wheeling, IL
 
—

 
776

 
805

 
—

 
1,581

 
9

 
8/21/2012
 
2001
Best Buy
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bourbannais, IL
 
 (f)

 
1,181

 
3,809

 
—

 
4,990

 
380

 
8/31/2009
 
1991
 
Coral Springs, FL
 
3,400

 
2,654

 
2,959

 
—

 
5,613

 
278

 
8/31/2009
 
1993
 
Indianapolis, IN
 
 (f)

 
808

 
3,468

 
—

 
4,276

 
139

 
7/20/2011
 
2009
 
Kenosha, WI
 
 (f)

 
1,470

 
4,518

 
—

 
5,988

 
176

 
7/12/2011
 
2008
 
Lakewood , CO
 
—

 
2,318

 
4,603

 
—

 
6,921

 
422

 
8/31/2009
 
1990
 
Marquette, MI
 
 (f)

 
561

 
3,732

 
(2
)
 
4,291

 
210

 
2/16/2011
 
2010
 
Montgomery, AL
 
3,148

 
986

 
4,116

 
—

 
5,102

 
285

 
7/6/2010
 
2003
 
Norton Shores, MI
 
 (f)

 
1,323

 
3,489

 
—

 
4,812

 
166

 
3/30/2011
 
2001
 
Pineville, NC
 
5,296

 
1,611

 
6,003

 
—

 
7,614

 
339

 
12/28/2010
 
2003
 
Richmond, IN
 
 (f)

 
359

 
3,644

 
—

 
4,003

 
138

 
7/27/2011
 
2011
 
Southaven, MS
 
 (f)

 
1,258

 
2,901

 
—

 
4,159

 
108

 
9/26/2011
 
2007
Big O Tires
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Phoenix, AZ
 
782

 
554

 
731

 
—

 
1,285

 
42

 
10/20/2010
 
2010
Bi-Lo Grocery
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greenwood, SC
 
 (f)

 
189

 
3,288

 
—

 
3,477

 
144

 
5/3/2011
 
1999
 
Mt. Pleasant, SC
 
 (f)

 
2,374

 
5,441

 
—

 
7,815

 
234

 
5/3/2011
 
2003
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

S-4

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
BJ’s Wholesale Club
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Auburn, ME
 
 (f)

 
$
4,419

 
$
8,603

 
$
—

 
$
13,022

 
$
397

 
9/30/2011
 
1995
 
Boynton Beach, FL
 
 (f)

 
6,320

 
9,164

 
—

 
15,484

 
320

 
9/30/2011
 
2001
 
California (Lexington Park), MD
 
 (f)

 
5,347

 
10,404

 
—

 
15,751

 
352

 
9/30/2011
 
2003
 
Deptford, NJ
 
11,004

 
1,764

 
13,244

 
—

 
15,008

 
476

 
9/30/2011
 
1995
 
Greenfield, MA
 
8,416

 
2,796

 
9,060

 
—

 
11,856

 
390

 
9/30/2011
 
1997
 
Jacksonville, FL
 
 (f)

 
4,840

 
13,342

 
—

 
18,182

 
468

 
9/30/2011
 
2003
 
Lancaster, PA
 
13,621

 
3,586

 
14,934

 
—

 
18,520

 
536

 
9/30/2011
 
1986
 
Leominster, MA
 
 (f)

 
5,227

 
13,147

 
—

 
18,374

 
572

 
9/30/2011
 
1993
 
Pembroke Pines, FL
 
8,446

 
5,162

 
7,122

 
—

 
12,284

 
251

 
9/30/2011
 
1997
 
Portsmouth, NH
 
 (f)

 
6,980

 
13,264

 
—

 
20,244

 
613

 
9/30/2011
 
1993
 
Westminster, MD
 
13,978

 
5,712

 
13,238

 
—

 
18,950

 
484

 
9/30/2011
 
2001
 
Uxbridge (DC), MA
 
12,645

 
2,778

 
24,514

 
—

 
27,292

 
937

 
9/30/2011
 
2006
Bonefish
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gainesville, VA
 
 (f)

 
1,234

 
1,491

 
—

 
2,725

 
30

 
3/14/2012
 
2004
 
Independence, OH
 
 (f)

 
932

 
1,865

 
—

 
2,797

 
38

 
3/14/2012
 
2006
 
Lakeland, FL
 
 (f)

 
767

 
1,484

 
—

 
2,251

 
30

 
3/14/2012
 
2003
Breakfast Pointe
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Panama Beach City, FL
 
8,050

 
2,938

 
11,444

 
104

 
14,486

 
669

 
11/18/2010
 
2009
California Pizza Kitchen
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alpharetta, GA
 
 (f)

 
1,322

 
2,224

 
—

 
3,546

 
85

 
7/7/2011
 
1994
 
Atlanta, GA
 
 (f)

 
1,691

 
1,658

 
—

 
3,349

 
63

 
7/7/2011
 
1993
 
Grapevine, TX
 
 (f)

 
1,271

 
1,742

 
—

 
3,013

 
66

 
7/7/2011
 
1994
 
Schaumburg, IL
 
 (f)

 
1,283

 
2,175

 
—

 
3,458

 
82

 
7/7/2011
 
1995
 
Scottsdale, AZ
 
 (f)

 
1,555

 
1,529

 
—

 
3,084

 
58

 
7/7/2011
 
1994
Camp Creek Marketplace
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
East Point, GA
 
42,000

 
5,907

 
63,695

 
463

 
70,065

 
3,005

 
5/13/2011
 
2003
Caremark Towers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Glenview, IL
 
25,155

 
3,357

 
32,822

 
170

 
36,349

 
1,324

 
11/3/2011
 
1980
Cargill
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Blair, NE
 
2,515

 
263

 
4,160

 
—

 
4,423

 
321

 
3/17/2010
 
2009
Carmax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Austin, TX
 
9,900

 
3,268

 
15,016

 
—

 
18,284

 
899

 
8/25/2010
 
2004
 
Henderson, NV
 
 (f)

 
3,092

 
12,994

 
—

 
16,086

 
473

 
9/21/2011
 
2002
Carraba’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bowie, MD
 
 (f)

 
1,664

 
1,673

 
—

 
3,337

 
34

 
3/14/2012
 
2003
 
Brooklyn, OH
 
 (f)

 
1,002

 
1,686

 
—

 
2,688

 
34

 
3/14/2012
 
2002
 
Columbia, SC
 
 (f)

 
1,257

 
1,482

 
—

 
2,739

 
30

 
3/14/2012
 
2000
 
Duluth, GA
 
 (f)

 
1,290

 
1,884

 
—

 
3,174

 
38

 
3/14/2012
 
2004
 
Johnson City, TN
 
 (f)

 
1,292

 
1,782

 
—

 
3,074

 
36

 
3/14/2012
 
2003
 
Louisville, CO
 
 (f)

 
797

 
1,218

 
—

 
2,015

 
25

 
3/14/2012
 
2000
 
Scottsdale, AZ
 
 (f)

 
953

 
1,002

 
—

 
1,955

 
20

 
3/14/2012
 
2000
 
Tampa, FL
 
 (f)

 
1,795

 
1,366

 
—

 
3,161

 
28

 
3/14/2012
 
1994
 
Washington Township, OH
 
 (f)

 
881

 
1,529

 
—

 
2,410

 
31

 
3/14/2012
 
2001
Century Town Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vero Beach, FL
 
8,130

 
4,142

 
8,549

 
309

 
13,000

 
399

 
6/9/2011
 
2008
Children’s Courtyard
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grand Prairie, TX
 
 (f)

 
225

 
727

 
—

 
952

 
38

 
12/15/2010
 
1999
Childtime Childcare
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bedford, OH
 
 (f)

 
77

 
549

 
—

 
626

 
30

 
12/15/2010
 
1979
 
Modesto (Floyd), CA
 
 (f)

 
265

 
685

 
—

 
950

 
41

 
12/15/2010
 
1988
 
Oklahoma City (Rockwell), OK
 
 (f)

 
56

 
562

 
—

 
618

 
30

 
12/15/2010
 
1986

S-5

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Childtime Childcare (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oklahoma City (Western), OK
 
$ (f)

 
$
77

 
$
561

 
$
—

 
$
638

 
$
30

 
12/15/2010
 
1985
Chili’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Flanders, NJ
 
1,508

 
624

 
1,472

 
—

 
2,096

 
95

 
6/30/2010
 
2003
Cigna
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Phoenix, AZ
 
—

 
5,359

 
15,568

 
—

 
20,927

 
20

 
12/19/2012
 
2012
 
Plano, TX
 
31,400

 
7,782

 
38,237

 
—

 
46,019

 
3,402

 
2/24/2010
 
2009
Cleveland Town Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cleveland, TN
 
—

 
1,623

 
14,831

 
—

 
16,454

 
455

 
12/20/2011
 
2008
CompUSA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Arlington, TX
 
1,770

 
1,215

 
1,426

 
65

 
2,706

 
116

 
10/18/2010
 
1992
ConAgra Foods
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Milton, PA
 
16,245

 
3,404

 
22,867

 
209

 
26,480

 
947

 
6/14/2011
 
1991
Cost Plus
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
La Quinta, CA
 
—

 
1,073

 
3,590

 
—

 
4,663

 
4

 
12/31/2012
 
2007
Cracker Barrel
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Abilene, TX
 
—

 
1,110

 
1,666

 
—

 
2,776

 
185

 
6/30/2009
 
2005
 
Bristol, VA
 
—

 
578

 
1,643

 
—

 
2,221

 
182

 
6/30/2009
 
2006
 
Columbus, GA
 
—

 
1,002

 
1,535

 
—

 
2,537

 
168

 
7/15/2009
 
2003
 
Fort Mill, SC
 
—

 
969

 
1,615

 
—

 
2,584

 
178

 
6/30/2009
 
2006
 
Greensboro, NC
 
—

 
1,127

 
1,473

 
—

 
2,600

 
164

 
6/30/2009
 
2005
 
Piedmont, SC
 
—

 
1,218

 
1,672

 
—

 
2,890

 
185

 
6/30/2009
 
2005
 
Rocky Mount, SC
 
—

 
920

 
1,433

 
—

 
2,353

 
161

 
6/30/2009
 
2006
 
San Antonio, TX
 
—

 
1,129

 
1,687

 
—

 
2,816

 
186

 
6/30/2009
 
2005
 
Sherman, TX
 
—

 
1,217

 
1,579

 
—

 
2,796

 
172

 
6/30/2009
 
2007
 
Waynesboro, VA
 
—

 
1,072

 
1,608

 
—

 
2,680

 
177

 
6/30/2009
 
2004
Crossroads Marketplace
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warner Robbins, GA
 
 (f)

 
2,128

 
8,517

 
20

 
10,665

 
264

 
12/20/2011
 
2008
CSAA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oklahoma City, OK
 
 (f)

 
2,861

 
23,059

 
—

 
25,920

 
1,631

 
11/15/2010
 
2009
CVS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Anderson, SC
 
1,166

 
618

 
1,231

 
—

 
1,849

 
23

 
4/26/2012
 
1998
 
Athens, GA
 
 (f)

 
1,907

 
3,234

 
—

 
5,141

 
170

 
12/14/2010
 
2009
 
Auburndale, FL
 
1,565

 
1,152

 
1,641

 
—

 
2,793

 
89

 
11/1/2010
 
1999
 
Bellevue, OH
 
1,011

 
175

 
1,777

 
—

 
1,952

 
51

 
11/4/2011
 
1998
 
Boca Raton, FL
 
2,625

 
—

 
2,862

 
—

 
2,862

 
150

 
12/14/2010
 
2009
 
Brownsville, TX
 
 (f)

 
1,156

 
3,114

 
—

 
4,270

 
165

 
12/14/2010
 
2009
 
Cayce, SC
 
 (f)

 
1,639

 
2,548

 
—

 
4,187

 
134

 
12/14/2010
 
2009
 
Charlotte, NC
 
 (f)

 
1,147

 
1,660

 
—

 
2,807

 
74

 
4/26/2011
 
2008
 
Cherry Hill, NJ
 
 (f)

 
6,236

 
—

 
—

 
6,236

 
—

 
10/13/2011
 
(g)
 
Chicago (W. 103rd St), IL
 
 (f)

 
980

 
5,670

 
—

 
6,650

 
185

 
9/16/2011
 
2009
 
City of Industry, CA
 
2,500

 
—

 
3,270

 
—

 
3,270

 
171

 
12/14/2010
 
2009
 
Dolton, IL
 
 (f)

 
528

 
4,484

 
—

 
5,012

 
175

 
7/8/2011
 
2008
 
Dover, DE
 
2,046

 
3,678

 
—

 
—

 
3,678

 
—

 
1/7/2011
 
(g)
 
Eden, NC
 
—

 
830

 
1,277

 
—

 
2,107

 
24

 
4/26/2012
 
1998
 
Edinburg, TX
 
2,003

 
1,133

 
2,327

 
—

 
3,460

 
202

 
8/13/2009
 
2008
 
Edison, NJ
 
 (f)

 
3,159

 
—

 
—

 
3,159

 
—

 
4/13/2011
 
(g)
 
Evansville, IN
 
1,850

 
355

 
2,255

 
—

 
2,610

 
85

 
7/11/2011
 
2000
 
Fredericksburg, VA
 
—

 
1,936

 
3,737

 
—

 
5,673

 
371

 
1/6/2009
 
2008
 
Ft. Myers, FL
 
3,025

 
2,412

 
2,586

 
—

 
4,998

 
168

 
6/18/2010
 
2009
 
Gainesville, TX
 
2,215

 
432

 
2,350

 
—

 
2,782

 
135

 
12/23/2010
 
2003
 
Greenville, SC
 
1,840

 
1,206

 
1,531

 
—

 
2,737

 
28

 
4/26/2012
 
1998

S-6

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
CVS (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gulf Breeze, FL
 
$
1,079

 
$
1,843

 
$
—

 
$
—

 
$
1,843

 
$
—

 
10/12/2010
 
(g)
 
Jacksonville, FL
 
3,715

 
2,552

 
3,441

 
—

 
5,993

 
180

 
12/14/2010
 
2009
 
Kernersville, NC
 
—

 
905

 
1,209

 
—

 
2,114

 
22

 
4/26/2012
 
1998
 
Lake Havasu City, AZ
 
 (f)

 
1,438

 
3,780

 
—

 
5,218

 
126

 
9/16/2011
 
2008
 
Lake Wales, FL
 
1,625

 
1,173

 
1,715

 
—

 
2,888

 
92

 
11/1/2010
 
1999
 
Lawrence, KS
 
2,908

 
1,080

 
3,491

 
—

 
4,571

 
186

 
12/14/2010
 
2009
 
Lawrenceville, GA
 
2,940

 
2,387

 
2,117

 
—

 
4,504

 
91

 
7/8/2011
 
2008
 
Lawrenceville, NJ
 
5,170

 
3,531

 
4,387

 
—

 
7,918

 
230

 
12/14/2010
 
2009
 
Liberty, MO
 
—

 
1,506

 
2,508

 
—

 
4,014

 
219

 
8/13/2009
 
2009
 
Lynchburg, VA
 
1,748

 
723

 
2,122

 
—

 
2,845

 
134

 
10/12/2010
 
1999
 
Madison, NC
 
1,587

 
269

 
1,654

 
—

 
1,923

 
31

 
4/26/2012
 
1998
 
Madison Heights, VA
 
1,592

 
863

 
1,726

 
—

 
2,589

 
110

 
10/22/2010
 
1997
 
Meridianville, AL
 
1,990

 
1,021

 
2,454

 
—

 
3,475

 
189

 
12/30/2009
 
2008
 
Mineola, NY
 
2,280

 
—

 
3,166

 
—

 
3,166

 
166

 
12/14/2010
 
2008
 
Minneapolis, MN
 
 (f)

 
260

 
4,447

 
—

 
4,707

 
250

 
12/14/2010
 
2009
 
Mishawaka, IN
 
2,258

 
422

 
3,469

 
(8
)
 
3,883

 
201

 
9/8/2010
 
2006
 
Moonville, SC
 
1,163

 
757

 
1,024

 
—

 
1,781

 
19

 
4/26/2012
 
1998
 
Naples, FL
 
2,675

 
—

 
2,943

 
—

 
2,943

 
154

 
12/14/2010
 
2009
 
New Port Richey, FL
 
1,670

 
1,032

 
2,271

 
—

 
3,303

 
161

 
3/26/2010
 
2004
 
Noblesville, IN
 
—

 
1,084

 
2,684

 
—

 
3,768

 
233

 
8/13/2009
 
2009
 
Oak Forest, IL
 
—

 
1,235

 
2,731

 
—

 
3,966

 
236

 
8/13/2009
 
2009
 
Oklahoma City, OK
 
—

 
752

 
1,228

 
—

 
1,980

 
17

 
6/4/2012
 
1996
 
Phoenix, AZ
 
 (f)

 
2,051

 
4,087

 
—

 
6,138

 
136

 
9/16/2011
 
2008
 
Ringgold, GA
 
1,948

 
961

 
2,418

 
—

 
3,379

 
159

 
8/31/2010
 
2007
 
Sherman, TX
 
 (f)

 
935

 
2,646

 
—

 
3,581

 
105

 
6/10/2011
 
1999
 
Southaven (Goodman), MS
 
4,270

 
1,489

 
3,503

 
—

 
4,992

 
184

 
12/14/2010
 
2009
 
Southaven, MS
 
2,700

 
1,885

 
2,836

 
—

 
4,721

 
248

 
7/31/2009
 
2009
 
Sparks, NV
 
2,711

 
2,100

 
2,829

 
—

 
4,929

 
242

 
8/13/2009
 
2009
 
St. Augustine, FL
 
 (f)

 
1,283

 
3,364

 
—

 
4,647

 
147

 
4/26/2011
 
2008
 
The Village, OK
 
3,425

 
1,039

 
2,472

 
—

 
3,511

 
127

 
12/14/2010
 
2009
 
Titusville, PA
 
 (f)

 
849

 
1,499

 
—

 
2,348

 
43

 
11/4/2011
 
1998
 
Warren, OH
 
 (f)

 
329

 
1,191

 
—

 
1,520

 
36

 
11/4/2011
 
1998
 
Weaverville, NC
 
3,098

 
1,559

 
3,365

 
—

 
4,924

 
199

 
9/30/2010
 
2009
CVS/Huntington Bank
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Northville, MI
 
 (f)

 
3,695

 
—

 
—

 
3,695

 
—

 
8/17/2011
 
(g)
Dahl’s Supermarket
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Des Moines (Beaver), IA
 
 (f)

 
373

 
2,825

 
—

 
3,198

 
128

 
6/15/2011
 
1985
 
Des Moines (Ingersoll), IA
 
 (f)

 
1,968

 
7,786

 
—

 
9,754

 
318

 
6/15/2011
 
2011
 
Des Moines (Fleur), IA
 
 (f)

 
453

 
1,685

 
—

 
2,138

 
77

 
6/15/2011
 
2002
 
Johnston, IA
 
 (f)

 
1,948

 
5,548

 
—

 
7,496

 
231

 
6/15/2011
 
2000
Davita Dialysis
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Augusta, GA
 
 (f)

 
99

 
1,433

 
1

 
1,533

 
61

 
7/22/2011
 
2000
 
Casselberry, FL
 
 (f)

 
313

 
1,556

 
1

 
1,870

 
50

 
12/9/2011
 
2007
 
Douglasville, GA
 
 (f)

 
97

 
1,467

 
(1
)
 
1,563

 
62

 
7/22/2011
 
2001
 
Ft. Wayne, IN
 
 (f)

 
252

 
2,305

 
—

 
2,557

 
52

 
2/16/2012
 
2008
 
Grand Rapids, MI
 
 (f)

 
123

 
1,372

 
—

 
1,495

 
79

 
4/19/2011
 
1997
 
Lawrenceville, NJ
 
 (f)

 
518

 
2,217

 
—

 
2,735

 
48

 
3/23/2012
 
2009
 
Sanford, FL
 
 (f)

 
426

 
2,015

 
—

 
2,441

 
66

 
12/19/2011
 
2005
 
Willow Grove, PA
 
 (f)

 
273

 
2,575

 
—

 
2,848

 
92

 
10/28/2011
 
2010
Dell Perot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lincoln, NE
 
 (f)

 
1,607

 
17,059

 
—

 
18,666

 
1,173

 
11/15/2010
 
2009

S-7

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Del Monte Plaza
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reno, NV
 
$
9,953

 
$
3,429

 
$
12,252

 
$
49

 
$
15,730

 
$
365

 
11/2/2011
 
2011
Denver West Plaza
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lakewood , CO
 
 (f)

 
2,369

 
9,847

 
—

 
12,216

 
410

 
7/22/2011
 
2002
Dick’s Sporting Goods
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charleston, SC
 
 (f)

 
3,060

 
3,809

 
—

 
6,869

 
190

 
8/31/2011
 
2005
 
Fort Gratiot, MI
 
3,411

 
699

 
4,826

 
—

 
5,525

 
86

 
6/29/2012
 
2010
 
Jackson, TN
 
 (f)

 
1,433

 
3,988

 
—

 
5,421

 
302

 
2/25/2011
 
2007
Diamond Crossing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Anchorage, AK
 
7,980

 
5,753

 
8,769

 
—

 
14,522

 
312

 
9/27/2011
 
2007
Dollar General
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cade, LA
 
—

 
178

 
945

 
—

 
1,123

 
1

 
12/18/2012
 
2012
 
Grambling, LA
 
—

 
509

 
718

 
—

 
1,227

 
2

 
11/30/2012
 
2012
 
Lake Charles, LA
 
—

 
351

 
716

 
—

 
1,067

 
2

 
11/30/2012
 
2012
 
Lakeland, FL
 
—

 
342

 
1,621

 
—

 
1,963

 
2

 
12/18/2012
 
2012
 
Lowell, OH
 
—

 
142

 
970

 
—

 
1,112

 
3

 
11/30/2012
 
2012
 
Lyerly, GA
 
—

 
230

 
781

 
—

 
1,011

 
3

 
11/30/2012
 
2012
 
Orange, TX
 
—

 
300

 
886

 
—

 
1,186

 
3

 
11/30/2012
 
2012
 
Phenix City, AL
 
—

 
255

 
721

 
—

 
976

 
3

 
11/30/2012
 
2012
 
Ponca City, OK
 
—

 
177

 
971

 
—

 
1,148

 
1

 
12/20/2012
 
2012
 
Tahlequah, OK
 
—

 
121

 
946

 
—

 
1,067

 
1

 
12/20/2012
 
2012
 
Vidor, TX
 
—

 
197

 
804

 
—

 
1,001

 
3

 
11/30/2012
 
2012
 
Wagoner, OK
 
—

 
23

 
954

 
—

 
977

 
1

 
12/20/2012
 
2012
Eastland Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
West Covina, CA
 
90,000

 
41,559

 
102,941

 
242

 
144,742

 
1,879

 
5/14/2012
 
1998
Encana Oil & Gas
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Plano, TX
 
66,000

 
2,623

 
101,829

 
—

 
104,452

 
355

 
11/27/2012
 
2012
Emdeon
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nashville, TN
 
4,700

 
556

 
8,015

 
—

 
8,571

 
283

 
9/29/2011
 
2010
Evans Exchange
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Evans, GA
 
6,730

 
2,761

 
7,996

 
—

 
10,757

 
517

 
6/10/2010
 
(g)
Experian
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Schaumburg, IL
 
18,900

 
4,359

 
20,834

 
—

 
25,193

 
1,911

 
4/30/2010
 
1999
Fairlane Green
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allen Park, MI
 
24,000

 
14,975

 
27,109

 
165

 
42,249

 
855

 
2/22/2012
 
2005
Falcon Valley
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lenexa, KS
 
6,375

 
1,946

 
8,992

 
—

 
10,938

 
506

 
12/23/2010
 
2008
Family Dollar
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Abbeville, LA
 
740

 
128

 
898

 
—

 
1,026

 
18

 
4/30/2012
 
2005
 
Alamogordo, NM
 
524

 
154

 
732

 
—

 
886

 
14

 
4/30/2012
 
2001
 
Alexandria, LA
 
458

 
136

 
548

 
—

 
684

 
11

 
4/30/2012
 
2005
 
Altha, FL
 
 (f)

 
132

 
699

 
—

 
831

 
14

 
4/30/2012
 
2011
 
Apopka, FL
 
1,127

 
626

 
954

 
—

 
1,580

 
18

 
4/30/2012
 
2011
 
Avondale, AZ
 
974

 
566

 
1,014

 
—

 
1,580

 
19

 
4/30/2012
 
2002
 
Baton Rouge, LA
 
 (f)

 
399

 
637

 
—

 
1,036

 
13

 
4/30/2012
 
2003
 
Battle Mountain, NV
 
 (f)

 
162

 
1,230

 
—

 
1,392

 
24

 
4/30/2012
 
2009
 
Beaumont (College), TX
 
 (f)

 
226

 
733

 
—

 
959

 
14

 
4/30/2012
 
2003
 
Beaumont (Highway 105), TX
 
654

 
229

 
700

 
—

 
929

 
14

 
4/30/2012
 
2003
 
Beaumont (Washington), TX
 
 (f)

 
331

 
959

 
—

 
1,290

 
19

 
4/30/2012
 
2003
 
Beaver, UT
 
646

 
108

 
663

 
—

 
771

 
13

 
4/30/2012
 
2007
 
Berkeley, MO
 
969

 
263

 
1,045

 
—

 
1,308

 
20

 
4/30/2012
 
2003
 
Bethel, OH
 
852

 
275

 
974

 
—

 
1,249

 
13

 
7/11/2012
 
2005

S-8

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Family Dollar (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Brazoria, TX
 
$ (f)

 
$
251

 
$
800

 
$
—

 
$
1,051

 
$
16

 
4/30/2012
 
2002
 
Bristol, FL
 
631

 
227

 
684

 
—

 
911

 
13

 
4/30/2012
 
2011
 
Bristol, VA
 
608

 
174

 
676

 
—

 
850

 
13

 
4/30/2012
 
1978
 
Brooklyn, MI
 
 (f)

 
113

 
590

 
—

 
703

 
11

 
4/30/2012
 
2002
 
Burton, MI
 
866

 
132

 
842

 
—

 
974

 
16

 
4/30/2012
 
2003
 
Canton, OH
 
460

 
91

 
581

 
—

 
672

 
13

 
4/30/2012
 
2004
 
Casa Grande, AZ
 
 (f)

 
92

 
716

 
—

 
808

 
14

 
4/30/2012
 
2003
 
Cleveland , OH
 
1,079

 
53

 
1,380

 
—

 
1,433

 
19

 
7/11/2012
 
2003
 
Cleveland (Pearl), OH
 
1,370

 
278

 
1,437

 
—

 
1,715

 
32

 
4/30/2012
 
1994
 
Clovis, NM
 
657

 
95

 
889

 
—

 
984

 
17

 
4/30/2012
 
2004
 
Cockrell Hill, TX
 
970

 
579

 
807

 
—

 
1,386

 
16

 
4/30/2012
 
2002
 
Converse, TX
 
409

 
144

 
501

 
—

 
645

 
12

 
4/30/2012
 
2003
 
Coolidge, AZ
 
603

 
106

 
832

 
—

 
938

 
16

 
4/30/2012
 
2000
 
Dacano, CO
 
757

 
180

 
878

 
—

 
1,058

 
17

 
4/30/2012
 
2003
 
Dallas, TX
 
627

 
270

 
676

 
—

 
946

 
13

 
4/30/2012
 
2004
 
Deland, FL
 
1,057

 
548

 
1,014

 
—

 
1,562

 
19

 
4/30/2012
 
2011
 
Deltona (1401), FL
 
686

 
196

 
879

 
—

 
1,075

 
17

 
4/30/2012
 
2004
 
Deltona (2901), FL
 
1,042

 
277

 
1,048

 
—

 
1,325

 
20

 
4/30/2012
 
2011
 
Des Moines, IA
 
822

 
363

 
840

 
—

 
1,203

 
15

 
4/30/2012
 
2003
 
Dickinson, TX
 
681

 
163

 
811

 
—

 
974

 
16

 
4/30/2012
 
2010
 
El Dorado, AR
 
663

 
78

 
861

 
—

 
939

 
18

 
4/30/2012
 
2002
 
Farmerville, LA
 
722

 
146

 
704

 
—

 
850

 
14

 
4/30/2012
 
2003
 
Fort Dodge, IA
 
408

 
107

 
499

 
—

 
606

 
9

 
4/30/2012
 
2002
 
Fort Lupton, CO
 
916

 
197

 
1,061

 
—

 
1,258

 
21

 
4/30/2012
 
2003
 
Fort Meade, FL
 
417

 
214

 
555

 
—

 
769

 
11

 
4/30/2012
 
2000
 
Fort Mohave, AZ
 
 (f)

 
266

 
627

 
—

 
893

 
13

 
4/30/2012
 
2001
 
Fort Myers, FL
 
973

 
254

 
995

 
—

 
1,249

 
20

 
4/30/2012
 
2002
 
Gainesville, FL
 
1,002

 
505

 
903

 
—

 
1,408

 
17

 
4/30/2012
 
2011
 
Gallup, NM
 
 (f)

 
207

 
1,252

 
—

 
1,459

 
24

 
4/30/2012
 
2007
 
Green Bay, WI
 
 (f)

 
312

 
916

 
—

 
1,228

 
18

 
4/30/2012
 
2011
 
Greenville, MS
 
 (f)

 
138

 
782

 
—

 
920

 
15

 
4/30/2012
 
2011
 
Guadalupe, AZ
 
 (f)

 
339

 
657

 
—

 
996

 
13

 
4/30/2012
 
2004
 
Gulfport, MS
 
 (f)

 
375

 
1,045

 
—

 
1,420

 
20

 
4/30/2012
 
2007
 
Hernandez, NM
 
1,152

 
124

 
1,174

 
—

 
1,298

 
22

 
4/30/2012
 
2008
 
Homedale, ID
 
973

 
64

 
804

 
—

 
868

 
16

 
4/30/2012
 
2006
 
Hot Springs, AR
 
 (f)

 
266

 
772

 
—

 
1,038

 
15

 
4/30/2012
 
2011
 
Houston (Freeway), TX
 
920

 
969

 
416

 
—

 
1,385

 
8

 
4/30/2012
 
1981
 
Houston (Jester), TX
 
 (f)

 
106

 
631

 
—

 
737

 
12

 
4/30/2012
 
2002
 
Houston (Kuykendahl), TX
 
 (f)

 
593

 
1,016

 
—

 
1,609

 
20

 
4/30/2012
 
2009
 
Houston (Mount), TX
 
 (f)

 
150

 
893

 
—

 
1,043

 
17

 
4/30/2012
 
2002
 
Houston (Veterans), TX
 
911

 
358

 
883

 
—

 
1,241

 
17

 
4/30/2012
 
2002
 
Houston, TX
 
886

 
244

 
962

 
—

 
1,206

 
19

 
4/30/2012
 
2002
 
Hudson, MI
 
833

 
86

 
858

 
—

 
944

 
16

 
4/30/2012
 
2005
 
Indianapolis, IN
 
613

 
275

 
620

 
—

 
895

 
12

 
4/30/2012
 
2003
 
Jacksonville (Lem Turner), FL
 
1,028

 
605

 
866

 
—

 
1,471

 
17

 
4/30/2012
 
2008
 
Jacksonville (Moncrief), FL
 
789

 
333

 
812

 
—

 
1,145

 
16

 
4/30/2012
 
2011
 
Jacksonville, AR
 
571

 
135

 
701

 
—

 
836

 
15

 
4/30/2012
 
2002
 
Jemison, AL
 
757

 
145

 
923

 
—

 
1,068

 
18

 
4/30/2012
 
2011
 
Kansas City (Blue Ridge), MO
 
683

 
280

 
749

 
—

 
1,029

 
14

 
4/30/2012
 
2003

S-9

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Family Dollar (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kansas City (Meyer), MO
 
$
970

 
$
218

 
$
1,155

 
$
—

 
$
1,373

 
$
22

 
4/30/2012
 
2004
 
Kansas City (Prospect), MO
 
1,211

 
200

 
1,497

 
—

 
1,697

 
29

 
4/30/2012
 
2004
 
Kansas City (State), KS
 
982

 
247

 
1,127

 
—

 
1,374

 
22

 
4/30/2012
 
2002
 
Kentwood, LA
 
683

 
144

 
693

 
—

 
837

 
14

 
4/30/2012
 
2003
 
Kentwood, MI
 
739

 
307

 
699

 
—

 
1,006

 
13

 
4/30/2012
 
2001
 
Kingston, OK
 
 (f)

 
25

 
571

 
—

 
596

 
11

 
4/30/2012
 
2000
 
Kissimmee, FL
 
970

 
679

 
804

 
—

 
1,483

 
15

 
4/30/2012
 
2011
 
Lake City, FL
 
622

 
174

 
785

 
—

 
959

 
15

 
4/30/2012
 
2011
 
Lakeland, FL
 
732

 
370

 
697

 
—

 
1,067

 
14

 
4/30/2012
 
2003
 
Las Vegas, NV
 
876

 
321

 
954

 
—

 
1,275

 
18

 
4/30/2012
 
2005
 
Leander, TX
 
557

 
314

 
503

 
—

 
817

 
13

 
4/30/2012
 
2004
 
Little Rock, AR
 
467

 
99

 
600

 
—

 
699

 
12

 
4/30/2012
 
2002
 
Loveland, OH
 
798

 
250

 
905

 
—

 
1,155

 
8

 
9/24/2012
 
2002
 
Lufkin, TX
 
1,153

 
231

 
1,323

 
—

 
1,554

 
26

 
4/30/2012
 
2004
 
Lynn, MA
 
1,222

 
824

 
980

 
—

 
1,804

 
19

 
4/30/2012
 
2003
 
Macon, GA
 
673

 
226

 
781

 
—

 
1,007

 
15

 
4/30/2012
 
2011
 
Marshall, TX
 
 (f)

 
91

 
610

 
—

 
701

 
12

 
4/30/2012
 
2001
 
McAllen, TX
 
857

 
247

 
774

 
—

 
1,021

 
15

 
4/30/2012
 
2004
 
Memphis (Austin), TN
 
 (f)

 
295

 
859

 
—

 
1,154

 
17

 
4/30/2012
 
2004
 
Memphis (Lamar), TN
 
638

 
199

 
722

 
—

 
921

 
14

 
4/30/2012
 
2003
 
Memphis (Millbranch), TN
 
1,251

 
438

 
1,294

 
—

 
1,732

 
25

 
4/30/2012
 
2005
 
Memphis (Neely), TN
 
973

 
391

 
967

 
—

 
1,358

 
19

 
4/30/2012
 
2003
 
Mexia, TX
 
 (f)

 
64

 
515

 
—

 
579

 
10

 
4/30/2012
 
2000
 
Middletown, OH
 
660

 
200

 
790

 
—

 
990

 
16

 
4/30/2012
 
2001
 
Milton, FL
 
644

 
229

 
695

 
—

 
924

 
14

 
4/30/2012
 
2010
 
Milwaukee, WI
 
970

 
253

 
1,067

 
—

 
1,320

 
21

 
4/30/2012
 
2003
 
Mohave Valley, AZ
 
 (f)

 
256

 
364

 
—

 
620

 
8

 
4/30/2012
 
2003
 
Montgomery, AL
 
959

 
506

 
864

 
—

 
1,370

 
17

 
4/30/2012
 
2010
 
New Orleans, LA
 
1,146

 
683

 
915

 
—

 
1,598

 
18

 
4/30/2012
 
2005
 
Newaygo, MI
 
689

 
244

 
616

 
—

 
860

 
11

 
4/30/2012
 
2002
 
Noonday, TX
 
625

 
120

 
810

 
—

 
930

 
16

 
4/30/2012
 
2004
 
Ocala (28th St.), FL
 
 (f)

 
236

 
942

 
—

 
1,178

 
18

 
4/30/2012
 
2006
 
Ocala (Maricamp), FL
 
968

 
348

 
1,017

 
—

 
1,365

 
19

 
4/30/2012
 
2011
 
Okeechobee, FL
 
894

 
395

 
956

 
—

 
1,351

 
18

 
4/30/2012
 
2011
 
Ormond Beach, FL
 
 (f)

 
733

 
872

 
—

 
1,605

 
17

 
4/30/2012
 
2011
 
Palestine, TX
 
671

 
160

 
757

 
—

 
917

 
15

 
4/30/2012
 
2000
 
Pembroke Park, FL
 
1,141

 
668

 
930

 
—

 
1,598

 
18

 
4/30/2012
 
2006
 
Penn Yan, NY
 
525

 
286

 
501

 
—

 
787

 
10

 
4/30/2012
 
2003
 
Pensacola, FL
 
559

 
131

 
652

 
—

 
783

 
13

 
4/30/2012
 
2003
 
Petersburg, VA
 
948

 
250

 
924

 
—

 
1,174

 
18

 
4/30/2012
 
2003
 
Pharr, TX
 
969

 
287

 
628

 
—

 
915

 
13

 
4/30/2012
 
2002
 
Phoenix (McDowell), AZ
 
1,040

 
525

 
1,039

 
—

 
1,564

 
20

 
4/30/2012
 
2003
 
Phoenix (Southern), AZ
 
 (f)

 
1,063

 
899

 
—

 
1,962

 
17

 
4/30/2012
 
2003
 
Plant City (Baker), FL
 
1,173

 
650

 
1,007

 
—

 
1,657

 
19

 
4/30/2012
 
2005
 
Plant City (Gordon), FL
 
 (f)

 
356

 
935

 
—

 
1,291

 
18

 
4/30/2012
 
2004
 
Pontiac, MI
 
962

 
250

 
829

 
—

 
1,079

 
16

 
4/30/2012
 
2003
 
Port Arthur, TX
 
1,044

 
271

 
1,090

 
—

 
1,361

 
21

 
4/30/2012
 
2005
 
Princeton, IN
 
526

 
346

 
446

 
—

 
792

 
9

 
4/30/2012
 
2000
 
Raymondville, TX
 
542

 
120

 
609

 
—

 
729

 
12

 
4/30/2012
 
2002

S-10

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Family Dollar (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rio Grande, TX
 
$ (f)

 
$
201

 
$
852

 
$
—

 
$
1,053

 
$
17

 
4/30/2012
 
2003
 
Robstown, TX
 
550

 
59

 
759

 
—

 
818

 
19

 
4/30/2012
 
2003
 
Roswell, NM
 
766

 
128

 
928

 
—

 
1,056

 
18

 
4/30/2012
 
2004
 
Royse City, TX
 
972

 
530

 
802

 
—

 
1,332

 
16

 
4/30/2012
 
2002
 
Saginaw, MI
 
 (f)

 
161

 
936

 
—

 
1,097

 
18

 
4/30/2012
 
2003
 
San Angelo, TX
 
891

 
283

 
952

 
—

 
1,235

 
22

 
4/30/2012
 
2011
 
San Antonio (Culebra), TX
 
864

 
396

 
851

 
—

 
1,247

 
20

 
4/30/2012
 
2004
 
San Antonio (Cupples), TX
 
1,143

 
226

 
1,373

 
—

 
1,599

 
34

 
4/30/2012
 
2004
 
San Antonio (Foster), TX
 
506

 
190

 
572

 
—

 
762

 
14

 
4/30/2012
 
2004
 
San Antonio (Marbach), TX
 
598

 
260

 
632

 
—

 
892

 
15

 
4/30/2012
 
2004
 
San Antonio (Valley Hi), TX
 
800

 
295

 
826

 
—

 
1,121

 
20

 
4/30/2012
 
2002
 
San Antonio (Zarzamora), TX
 
728

 
286

 
812

 
—

 
1,098

 
20

 
4/30/2012
 
2004
 
San Benito, TX
 
598

 
147

 
610

 
—

 
757

 
12

 
4/30/2012
 
2004
 
San Diego, TX
 
602

 
62

 
651

 
—

 
713

 
13

 
4/30/2012
 
2004
 
Seymour, IN
 
 (f)

 
222

 
736

 
—

 
958

 
14

 
4/30/2012
 
2000
 
Shreveport, LA
 
892

 
228

 
784

 
—

 
1,012

 
15

 
4/30/2012
 
2005
 
St. Louis (Ferry), MO
 
 (f)

 
343

 
989

 
—

 
1,332

 
19

 
4/30/2012
 
2003
 
St. Louis, MO
 
972

 
258

 
1,053

 
—

 
1,311

 
20

 
4/30/2012
 
2003
 
St. Peter, MN
 
409

 
105

 
559

 
—

 
664

 
13

 
4/30/2012
 
1960
 
St. Petersburg (34th), FL
 
1,093

 
802

 
833

 
—

 
1,635

 
16

 
4/30/2012
 
2011
 
Tallahassee, FL
 
 (f)

 
674

 
748

 
—

 
1,422

 
15

 
4/30/2012
 
2011
 
Tampa (22nd St.), FL
 
1,005

 
584

 
912

 
—

 
1,496

 
18

 
4/30/2012
 
2008
 
Tampa (MLK), FL
 
1,168

 
886

 
869

 
—

 
1,755

 
17

 
4/30/2012
 
2011
 
Terre Haute, IN
 
394

 
90

 
542

 
—

 
632

 
10

 
4/30/2012
 
2011
 
Topeka, KS
 
 (f)

 
265

 
1,243

 
—

 
1,508

 
24

 
4/30/2012
 
2004
 
Tyler, TX
 
416

 
107

 
509

 
—

 
616

 
10

 
4/30/2012
 
2003
 
Victoria, TX
 
 (f)

 
399

 
164

 
—

 
563

 
3

 
4/30/2012
 
2003
 
Waco, TX
 
440

 
128

 
504

 
—

 
632

 
12

 
4/30/2012
 
2001
Family Fare Supermarket
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Battle Creek, MI
 
 (f)

 
1,400

 
5,754

 
—

 
7,154

 
292

 
1/31/2011
 
2010
FedEx
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beekmantown, NY
 
2,614

 
299

 
3,403

 
—

 
3,702

 
238

 
4/23/2010
 
2008
 
Bossier City, LA
 
 (f)

 
197

 
4,139

 
—

 
4,336

 
267

 
11/1/2010
 
2009
 
Dublin, VA
 
 (f)

 
159

 
2,765

 
—

 
2,924

 
163

 
10/21/2010
 
2008
 
Effingham, IL
 
7,040

 
1,321

 
11,137

 
—

 
12,458

 
859

 
12/29/2009
 
2008
 
Lafayette, IN
 
2,230

 
513

 
3,356

 
—

 
3,869

 
230

 
4/27/2010
 
2008
 
McComb, MS
 
 (f)

 
569

 
2,396

 
—

 
2,965

 
109

 
5/5/2011
 
2008
 
Northwood, OH
 
2,410

 
457

 
3,944

 
—

 
4,401

 
250

 
8/17/2010
 
1998
Fire Mountain Restaurant
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bossier City, LA
 
—

 
1,045

 
1,537

 
—

 
2,582

 
70

 
4/29/2011
 
2004
 
Cullman, AL
 
—

 
865

 
1,185

 
—

 
2,050

 
56

 
4/29/2011
 
1996
 
Horn Lake, MS
 
—

 
846

 
1,270

 
—

 
2,116

 
60

 
4/29/2011
 
1995
Fleming’s Steakhouse
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Englewood, CO
 
 (f)

 
1,278

 
2,256

 
—

 
3,534

 
46

 
3/14/2012
 
2004
Folsum Gateway II
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Folsum, CA
 
21,600

 
7,293

 
23,038

 
1,407

 
31,738

 
1,288

 
12/15/2010
 
2008
Food Lion
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Moyock, NC
 
 (f)

 
937

 
2,389

 
—

 
3,326

 
116

 
7/21/2011
 
1999


S-11

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Garden Ridge
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockbridge, GA
 
$
—

 
$
1,647

 
$
5,651

 
$
—

 
$
7,298

 
$
7

 
12/17/2012
 
1998
Giant Eagle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lancaster, OH
 
7,800

 
2,283

 
11,700

 
—

 
13,983

 
657

 
10/29/2010
 
2008
 
Lewis Center, OH
 
10,843

 
2,345

 
15,440

 
—

 
17,785

 
510

 
10/5/2011
 
2000
 
Gahanna, OH
 
—

 
4,530

 
15,261

 
—

 
19,791

 
16

 
12/20/2012
 
2002
Glen’s Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Manistee, MI
 
 (f)

 
387

 
4,230

 
—

 
4,617

 
192

 
5/19/2011
 
2009
Glynn Isles Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Brunswick, GA
 
 (f)

 
2,578

 
31,677

 
—

 
34,255

 
1,155

 
9/29/2011
 
2007
Golden Corral
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Akron, OH
 
1,166

 
531

 
1,384

 
—

 
1,915

 
27

 
5/16/2012
 
2003
 
Bakersfield, CA
 
—

 
2,011

 
1,990

 
—

 
4,001

 
44

 
3/21/2012
 
2011
 
Canton, OH
 
1,280

 
538

 
1,560

 
—

 
2,098

 
30

 
5/16/2012
 
2002
 
Cincinnati, OH
 
1,242

 
632

 
1,377

 
—

 
2,009

 
24

 
5/16/2012
 
1999
 
Clarksville, IN
 
1,589

 
734

 
1,815

 
—

 
2,549

 
31

 
5/16/2012
 
2002
 
Cleveland, OH
 
1,437

 
828

 
1,460

 
—

 
2,288

 
28

 
5/16/2012
 
2004
 
Dayton (Kingsridge), OH
 
 (f)

 
416

 
1,028

 
—

 
1,444

 
18

 
5/16/2012
 
2000
 
Dayton (Miller), OH
 
1,638

 
712

 
1,859

 
—

 
2,571

 
32

 
5/16/2012
 
2002
 
Dayton, OH
 
 (f)

 
580

 
1,097

 
—

 
1,677

 
20

 
5/16/2012
 
2000
 
Elyria, OH
 
1,160

 
1,057

 
879

 
—

 
1,936

 
19

 
5/16/2012
 
2004
 
Fairfield, OH
 
889

 
612

 
770

 
—

 
1,382

 
14

 
5/16/2012
 
1999
 
Grove City, OH
 
1,171

 
1,331

 
625

 
—

 
1,956

 
15

 
5/16/2012
 
2007
 
Independence, MO
 
 (f)

 
1,046

 
2,074

 
—

 
3,120

 
73

 
9/28/2011
 
2010
 
Louisville, KY
 
—

 
816

 
951

 
—

 
1,767

 
17

 
5/16/2012
 
2001
 
Monroeville, PA
 
 (f)

 
1,330

 
489

 
—

 
1,819

 
12

 
5/16/2012
 
1982
 
Northfield, OH
 
 (f)

 
906

 
340

 
—

 
1,246

 
11

 
5/16/2012
 
2004
 
Ontario, OH
 
1,339

 
477

 
1,784

 
—

 
2,261

 
33

 
5/16/2012
 
2004
 
Richmond, IN
 
—

 
505

 
715

 
—

 
1,220

 
13

 
5/16/2012
 
2002
 
San Angelo, TX
 
—

 
503

 
1,427

 
—

 
1,930

 
30

 
3/21/2012
 
2012
 
Spring, TX
 
—

 
2,567

 
1,385

 
—

 
3,952

 
28

 
4/5/2012
 
2011
 
Springfield, OH
 
689

 
501

 
606

 
—

 
1,107

 
12

 
5/16/2012
 
2000
 
Toledo, OH
 
—

 
744

 
2,056

 
—

 
2,800

 
38

 
5/16/2012
 
2004
Gold’s Gym
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Broken Arrow, OK
 
—

 
753

 
5,481

 
—

 
6,234

 
69

 
8/15/2012
 
2009
Goodyear
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Columbia, SC
 
—

 
524

 
1,768

 
8

 
2,300

 
29

 
5/23/2012
 
2010
 
Corpus Christi, TX
 
 (f)

 
666

 
1,214

 
—

 
1,880

 
23

 
4/27/2012
 
2008
 
Cumming (Old Atlanta), GA
 
1,664

 
1,006

 
1,240

 
—

 
2,246

 
20

 
5/23/2012
 
2010
 
Cumming, GA
 
1,614

 
387

 
2,068

 
—

 
2,455

 
33

 
5/23/2012
 
2010
Greenway Commons
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Houston, TX
 
33,000

 
35,421

 
28,002

 
5

 
63,428

 
638

 
3/23/2012
 
2008
Hanes Distribution
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rural Hall, NC
 
18,100

 
1,487

 
26,580

 
—

 
28,067

 
1,488

 
1/10/2011
 
1992
Harris Teeter
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Durham, NC
 
1,700

 
2,852

 
—

 
—

 
2,852

 
—

 
7/31/2009
 
(g)
HealthNow
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Buffalo, NY
 
42,500

 
1,699

 
69,587

 
150

 
71,436

 
4,047

 
12/16/2010
 
2007
HH Gregg Appliances
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chesterfield, MO
 
—

 
1,188

 
3,445

 
—

 
4,633

 
35

 
9/18/2012
 
2012
 
Joliet, IL
 
 (f)

 
1,221

 
1,173

 
—

 
2,394

 
39

 
2/17/2012
 
2011
 
Merrillville, IN
 
 (f)

 
319

 
3,617

 
112

 
4,048

 
100

 
2/17/2012
 
2011

S-12

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
HH Gregg Appliances (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North Charleston, SC
 
$
2,700

 
$
1,665

 
$
3,369

 
$
—

 
$
5,034

 
$
338

 
7/2/2009
 
2000
 
North Fayette, PA
 
 (f)

 
1,561

 
1,941

 
—

 
3,502

 
69

 
10/14/2011
 
1999
Highlands Ranch
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Highland Ranch, CO
 
3,475

 
2,017

 
3,713

 
—

 
5,730

 
153

 
8/16/2011
 
2007
Hillside Town Centre
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chicago, IL
 
—

 
7,677

 
16,199

 
—

 
23,876

 
168

 
9/28/2012
 
2009
Hobby Lobby
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Concord , NC
 
 (f)

 
1,425

 
3,703

 
—

 
5,128

 
135

 
12/12/2011
 
2004
 
Avon, IL
 
 (f)

 
1,810

 
3,355

 
—

 
5,165

 
143

 
6/17/2011
 
2007
 
Logan, UT
 
 (f)

 
1,379

 
2,804

 
—

 
4,183

 
106

 
10/20/2011
 
2008
Hobby Lobby Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greenville, SC
 
 (f)

 
2,173

 
3,858

 
—

 
6,031

 
165

 
7/22/2011
 
2003
Home Depot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Evans, GA
 
5,551

 
5,561

 
—

 
—

 
5,561

 
—

 
6/11/2010
 
(g)
 
Kennesaw, GA
 
7,884

 
1,640

 
1,321

 
8,179

 
11,140

 
191

 
11/4/2011
 

 
Las Vegas , NV
 
 (f)

 
7,167

 
—

 
—

 
7,167

 
—

 
4/15/2009
 
(g)
 
Odessa, TX
 
 (f)

 
4,704

 
—

 
—

 
4,704

 
—

 
4/15/2009
 
(g)
 
San Diego, CA
 
6,350

 
10,288

 
—

 
—

 
10,288

 
—

 
4/15/2009
 
(g)
 
Slidell, LA
 
1,996

 
3,631

 
—

 
—

 
3,631

 
—

 
7/28/2010
 
(g)
 
Tolleson, AZ
 
17,050

 
3,461

 
22,327

 
—

 
25,788

 
1,390

 
7/30/2010
 
2009
 
Tucson, AZ
 
6,025

 
6,125

 
—

 
—

 
6,125

 
—

 
10/21/2009
 
(g)
 
Winchester, VA
 
14,900

 
1,724

 
20,703

 
196

 
22,623

 
1,720

 
10/21/2009
 
2008
Igloo
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Katy, TX
 
20,300

 
4,117

 
32,552

 
—

 
36,669

 
2,172

 
5/21/2010
 
2004
Indian Lakes Crossing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Virginia Beach, VA
 
7,178

 
7,010

 
6,172

 
—

 
13,182

 
158

 
1/31/2012
 
2008
Irving Oil
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Belfast, ME
 
 (f)

 
267

 
606

 
—

 
873

 
17

 
12/29/2011
 
1997
 
Bethel, ME
 
 (f)

 
104

 
354

 
—

 
458

 
10

 
12/29/2011
 
1990
 
Boothbay Harbor, ME
 
 (f)

 
399

 
403

 
—

 
802

 
11

 
12/29/2011
 
1993
 
Caribou, ME
 
 (f)

 
130

 
375

 
—

 
505

 
11

 
12/29/2011
 
1990
 
Conway, NH
 
 (f)

 
198

 
371

 
—

 
569

 
10

 
12/29/2011
 
2004
 
Dover, NH
 
 (f)

 
416

 
477

 
—

 
893

 
13

 
12/29/2011
 
1988
 
Fort Kent, ME
 
 (f)

 
220

 
405

 
—

 
625

 
11

 
12/29/2011
 
1988
 
Kennebunk, ME
 
 (f)

 
313

 
659

 
—

 
972

 
19

 
12/29/2011
 
2002
 
Lincoln, ME
 
 (f)

 
240

 
379

 
—

 
619

 
11

 
12/29/2011
 
1985
 
Orono, ME
 
 (f)

 
195

 
240

 
—

 
435

 
7

 
12/29/2011
 
1984
 
Rochester, NH
 
 (f)

 
344

 
476

 
—

 
820

 
14

 
12/29/2011
 
1970
 
Rutland, VT
 
 (f)

 
178

 
214

 
—

 
392

 
6

 
12/29/2011
 
1984
 
Saco, ME
 
 (f)

 
286

 
527

 
—

 
813

 
15

 
12/29/2011
 
1995
 
Skowhegan, ME
 
 (f)

 
368

 
510

 
—

 
878

 
14

 
12/29/2011
 
1988
 
West Dummerston, VT
 
 (f)

 
99

 
344

 
—

 
443

 
10

 
12/29/2011
 
1993
 
Westminster, VT
 
 (f)

 
64

 
402

 
—

 
466

 
12

 
12/29/2011
 
1990
Jo-Ann’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shakopee, MN
 
—

 
787

 
1,527

 
—

 
2,314

 
13

 
9/1/2012
 
2012
Kingman Gateway
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kingman, AZ
 
—

 
1,418

 
3,085

 
—

 
4,503

 
129

 
8/16/2011
 
2009
Kirkland’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wilimington, NC
 
—

 
911

 
795

 
—

 
1,706

 
1

 
12/21/2012
 
2012
Kohl’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Brownsville, TX
 
 (f)

 
6,247

 
—

 
—

 
6,247

 
—

 
8/16/2011
 
(g)
 
Burnsville, MN
 
—

 
3,830

 
5,854

 
—

 
9,684

 
594

 
1/9/2009
 
1991

S-13

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Kohl’s (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Columbia, SC
 
$
6,275

 
$
1,484

 
$
9,462

 
$
—

 
$
10,946

 
$
734

 
12/7/2009
 
2007
 
Fort Dodge, IA
 
 (f)

 
1,246

 
2,922

 
—

 
4,168

 
82

 
12/14/2011
 
2011
 
McAllen, TX
 
3,591

 
1,094

 
5,565

 
—

 
6,659

 
402

 
3/26/2010
 
2005
 
Monroe, MI
 
5,146

 
880

 
4,044

 
—

 
4,924

 
163

 
6/30/2011
 
2006
 
Monrovia, CA
 
6,500

 
5,441

 
5,505

 
—

 
10,946

 
519

 
7/30/2009
 
1982
 
Onalaska, WI
 
3,550

 
1,541

 
5,148

 
—

 
6,689

 
298

 
12/13/2010
 
1992
 
Palm Coast, FL
 
 (f)

 
10,900

 
—

 
—

 
10,900

 
—

 
3/10/2011
 
(g)
 
Rancho Cordova, CA
 
 (f)

 
2,848

 
4,100

 
—

 
6,948

 
426

 
7/30/2009
 
1982
 
Rice Lake, WI
 
 (f)

 
1,249

 
3,927

 
—

 
5,176

 
160

 
5/5/2011
 
2011
 
Saginaw, MI
 
 (f)

 
1,062

 
5,941

 
—

 
7,003

 
272

 
3/10/2011
 
2011
 
Salina, KS
 
 (f)

 
636

 
4,653

 
—

 
5,289

 
261

 
10/29/2010
 
2008
 
Spartanburg , SC
 
—

 
3,046

 
5,713

 
—

 
8,759

 
8

 
12/6/2012
 
2006
 
Tavares, FL
 
4,400

 
7,926

 
—

 
—

 
7,926

 
—

 
6/30/2009
 
(g)
Kohl’s Academy
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hixson, TN
 
—

 
1,297

 
8,935

 
—

 
10,232

 
30

 
11/13/2012
 
2011
Kohl’s Plaza
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Napa, CA
 
 (f)

 
1,573

 
15,630

 
(42
)
 
17,161

 
569

 
8/23/2011
 
1983
Kum & Go
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sloan, IA
 
 (f)

 
336

 
1,839

 
—

 
2,175

 
133

 
4/23/2010
 
2008
 
Story City, IA
 
 (f)

 
216

 
1,395

 
—

 
1,611

 
113

 
2/25/2010
 
2006
 
Tipton, IA
 
 (f)

 
289

 
1,848

 
—

 
2,137

 
126

 
5/28/2010
 
2008
 
West Branch, IA
 
 (f)

 
132

 
808

 
—

 
940

 
66

 
2/25/2010
 
1997
Kyle Marketplace
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kyle, TX
 
24,750

 
5,954

 
36,810

 
71

 
42,835

 
1,036

 
12/30/2011
 
2007
L.A. Fitness
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Avondale, AZ
 
 (f)

 
1,730

 
5,750

 
—

 
7,480

 
214

 
8/31/2011
 
2006
 
Broadview, IL
 
 (f)

 
2,202

 
6,671

 
—

 
8,873

 
286

 
5/18/2011
 
2010
 
Carmel, IN
 
3,645

 
1,392

 
5,435

 
—

 
6,827

 
537

 
6/30/2009
 
2008
 
Dallas, TX
 
4,712

 
1,824

 
6,656

 
—

 
8,480

 
437

 
8/17/2010
 
2008
 
Denton, TX
 
3,960

 
1,635

 
5,082

 
—

 
6,717

 
396

 
3/31/2010
 
2009
 
Duncanville, TX
 
 (f)

 
429

 
5,843

 
—

 
6,272

 
204

 
9/26/2011
 
2007
 
Easton, PA
 
 (f)

 
765

 
6,622

 
—

 
7,387

 
133

 
4/27/2012
 
1979
 
Glendale, AZ
 
3,193

 
1,920

 
3,214

 
—

 
5,134

 
303

 
10/30/2009
 
2005
 
Highland, CA
 
4,700

 
1,255

 
6,777

 
—

 
8,032

 
533

 
2/4/2010
 
2009
 
Indianapolis, IN
 
 (f)

 
2,029

 
4,184

 
—

 
6,213

 
200

 
3/31/2011
 
2009
 
Marana, CA
 
—

 
1,098

 
5,410

 
—

 
6,508

 
39

 
9/13/2012
 
2011
 
Oakdale, MN
 
4,749

 
1,667

 
5,674

 
—

 
7,341

 
343

 
9/30/2010
 
2009
 
Oswego, IL
 
 (f)

 
1,958

 
6,280

 
—

 
8,238

 
132

 
3/23/2012
 
2008
 
Spring, TX
 
—

 
1,372

 
5,011

 
—

 
6,383

 
403

 
11/20/2009
 
2006
Lakeshore Crossing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gainesville, GA
 
4,400

 
2,314

 
5,802

 
191

 
8,307

 
362

 
9/15/2010
 
1994
Lowe’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Burlington, IA
 
 (f)

 
1,134

 
5,677

 
—

 
6,811

 
107

 
4/27/2012
 
1996
 
Columbia, SC
 
 (f)

 
9,565

 
—

 
—

 
9,565

 
—

 
2/10/2011
 
(g)
 
Denver, CO
 
—

 
12,634

 
—

 
—

 
12,634

 
—

 
2/2/2011
 
(g)
 
Kansas City, MO
 
4,250

 
4,323

 
—

 
—

 
4,323

 
—

 
11/20/2009
 
(g)
 
Las Vegas , NV
 
5,765

 
9,096

 
—

 
—

 
9,096

 
—

 
3/31/2009
 
(g)
 
Miamisburg, OH
 
6,375

 
2,155

 
6,320

 
—

 
8,475

 
262

 
9/9/2011
 
1994
 
Sanford, ME
 
4,672

 
8,482

 
—

 
—

 
8,482

 
—

 
6/28/2010
 
(g)
 
Ticonderoga, NY
 
4,345

 
7,344

 
—

 
—

 
7,344

 
—

 
8/31/2010
 
(g)
Macaroni Grill
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Flanders, NJ
 
915

 
477

 
1,125

 
—

 
1,602

 
72

 
6/30/2010
 
2003

S-14

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Macaroni Grill (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mt. Laurel, NJ
 
$
713

 
$
791

 
$
1,612

 
$
—

 
$
2,403

 
$
104

 
6/30/2010
 
2004
 
West Windsor, NJ
 
1,043

 
515

 
932

 
—

 
1,447

 
60

 
6/30/2010
 
1998
Mattress Firm
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fairview Heights, IL
 
—

 
140

 
703

 
—

 
843

 
9

 
7/23/2012
 
1977
 
Melbourne, FL
 
—

 
361

 
768

 
—

 
1,129

 
5

 
10/5/2012
 
2011
MedAssets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Plano, TX
 
19,873

 
6,589

 
6,052

 
27,511

 
40,152

 
—

 
11/22/2011
 
(g)
Merrill Lynch
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hopewell Township, NJ
 
—

 
15,073

 
88,852

 
—

 
103,925

 
137

 
12/12/2012
 
2001
Michael’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lafayette, LA
 
 (f)

 
1,345

 
2,570

 
—

 
3,915

 
70

 
3/9/2012
 
2011
Midtowne Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Anderson, SC
 
16,645

 
5,765

 
18,119

 
—

 
23,884

 
506

 
12/20/2011
 
2008
MotoMart
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Saint Charles, MO
 
 (f)

 
990

 
1,609

 
—

 
2,599

 
34

 
3/30/2012
 
2009
Mueller Regional Retail District 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Austin, TX
 
34,300

 
9,918

 
45,299

 
354

 
55,571

 
3,813

 
12/18/2009
 
2008
National Tire & Battery
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nashville, TN
 
799

 
372

 
1,138

 
—

 
1,510

 
82

 
4/21/2010
 
2010
Nature Coast Commons
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Spring Hill, FL
 
21,850

 
6,114

 
19,094

 
536

 
25,744

 
956

 
6/21/2011
 
2009
Northern Tool & Equipment 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ocala, FL
 
1,650

 
1,167

 
1,796

 
—

 
2,963

 
143

 
5/20/2010
 
2009
North Point Shopping Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cape Coral, FL
 
 (f)

 
1,244

 
8,152

 
(69
)
 
9,327

 
389

 
4/13/2011
 
2008
Office Depot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alvin, TX
 
 (f)

 
567

 
1,916

 
—

 
2,483

 
105

 
11/4/2011
 
2009
 
Corsicana, TX
 
 (f)

 
613

 
1,566

 
—

 
2,179

 
72

 
4/29/2011
 
2007
 
Houston, TX
 
 (f)

 
1,667

 
1,856

 
—

 
3,523

 
82

 
4/29/2011
 
2009
 
Mobile, AL
 
 (f)

 
553

 
1,708

 
—

 
2,261

 
91

 
4/29/2011
 
2008
Old Country Buffet
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Coon Rapids, MN
 
—

 
1,291

 
1,229

 
—

 
2,520

 
56

 
4/29/2011
 
2003
On the Border
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alpharetta, GA
 
1,329

 
1,240

 
1,406

 
—

 
2,646

 
91

 
6/30/2010
 
1997
 
Auburn Hills, MI
 
1,283

 
859

 
1,976

 
—

 
2,835

 
128

 
6/30/2010
 
1999
 
Buford, GA
 
1,236

 
1,140

 
1,277

 
—

 
2,417

 
82

 
6/30/2010
 
2001
 
Burleson, TX
 
1,439

 
980

 
1,791

 
—

 
2,771

 
116

 
6/30/2010
 
2000
 
College Station, TX
 
1,376

 
1,242

 
1,402

 
—

 
2,644

 
91

 
6/30/2010
 
1997
 
Columbus, OH
 
1,925

 
1,245

 
1,410

 
—

 
2,655

 
91

 
6/30/2010
 
1997
 
Concord Mills, NC
 
1,363

 
1,296

 
1,350

 
—

 
2,646

 
87

 
6/30/2010
 
2000
 
Denton, TX
 
1,317

 
1,028

 
1,480

 
—

 
2,508

 
96

 
6/30/2010
 
2002
 
DeSoto, TX
 
1,482

 
838

 
1,915

 
—

 
2,753

 
125

 
6/30/2010
 
1983
 
Fort Worth, TX
 
1,575

 
1,188

 
1,857

 
—

 
3,045

 
120

 
6/30/2010
 
1999
 
Garland, TX
 
1,020

 
690

 
1,311

 
—

 
2,001

 
84

 
6/30/2010
 
2007
 
Kansas City, MO
 
1,454

 
904

 
1,403

 
—

 
2,307

 
90

 
6/30/2010
 
1997
 
Lee’s Summit, MO
 
1,200

 
845

 
1,331

 
—

 
2,176

 
86

 
6/30/2010
 
2002
 
Lubbock, TX
 
1,376

 
743

 
1,996

 
—

 
2,739

 
129

 
6/30/2010
 
1994
 
Mesa, AZ
 
1,804

 
1,121

 
1,468

 
—

 
2,589

 
95

 
6/30/2010
 
2002
 
Mt. Laurel, NJ
 
1,447

 
559

 
1,139

 
—

 
1,698

 
73

 
6/30/2010
 
2004
 
Naperville, IL
 
1,494

 
1,260

 
1,786

 
(66
)
 
2,980

 
115

 
6/30/2010
 
1997
 
Novi, MI
 
1,177

 
653

 
1,837

 
—

 
2,490

 
119

 
6/30/2010
 
1997
 
Oklahoma City, OK
 
1,266

 
880

 
1,659

 
—

 
2,539

 
107

 
6/30/2010
 
1996

S-15

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
On the Border (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Peoria, AZ
 
$
1,562

 
$
1,071

 
$
1,245

 
$
—

 
$
2,316

 
$
81

 
6/30/2010
 
2002
 
Rockwall, TX
 
1,355

 
761

 
1,836

 
—

 
2,597

 
119

 
6/30/2010
 
1999
 
Rogers, AR
 
950

 
551

 
1,176

 
—

 
1,727

 
76

 
6/30/2010
 
2002
 
Tulsa, OK
 
1,427

 
952

 
1,907

 
—

 
2,859

 
124

 
6/30/2010
 
1995
 
West Springfield, MA
 
2,000

 
1,015

 
2,361

 
—

 
3,376

 
153

 
6/30/2010
 
1995
 
West Windsor, NJ
 
2,433

 
1,114

 
2,013

 
—

 
3,127

 
130

 
6/30/2010
 
1998
 
Woodbridge, VA
 
1,685

 
1,587

 
1,540

 
—

 
3,127

 
100

 
6/30/2010
 
1998
O’Reilly’s Auto Parts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Breaux Bridge, LA
 
401

 
91

 
608

 
—

 
699

 
43

 
3/15/2010
 
2009
 
Central, LA
 
 (f)

 
75

 
737

 
—

 
812

 
29

 
6/10/2011
 
2010
 
Christiansburg, VA
 
646

 
205

 
763

 
—

 
968

 
40

 
12/23/2010
 
2010
 
Highlands, TX
 
485

 
217

 
605

 
—

 
822

 
33

 
12/23/2010
 
2010
 
Houston, TX
 
560

 
254

 
680

 
—

 
934

 
36

 
1/13/2011
 
2010
 
LaPlace, LA
 
507

 
221

 
682

 
—

 
903

 
48

 
3/12/2010
 
2008
 
Louisville, KY
 
—

 
494

 
844

 
—

 
1,338

 
10

 
7/10/2012
 
2011
 
New Roads, LA
 
410

 
111

 
616

 
—

 
727

 
44

 
3/12/2010
 
2008
 
Ravenna, OH
 
 (f)

 
102

 
866

 
—

 
968

 
45

 
1/25/2011
 
2010
 
San Antonio, TX
 
703

 
356

 
853

 
—

 
1,209

 
45

 
12/23/2010
 
2010
 
Willard, OH
 
—

 
121

 
843

 
—

 
964

 
12

 
6/8/2012
 
2011
Outback Steakhouse
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Baton Rouge, LA
 
1,080

 
567

 
1,178

 
—

 
1,745

 
24

 
3/14/2012
 
2001
 
Boardman Township, OH
 
1,700

 
690

 
2,052

 
—

 
2,742

 
41

 
3/14/2012
 
1995
 
Centennial, CO
 
1,560

 
1,150

 
1,274

 
—

 
2,424

 
26

 
3/14/2012
 
1996
 
Colonial Heights, VA
 
2,160

 
1,656

 
1,715

 
—

 
3,371

 
35

 
3/14/2012
 
2000
 
Conroe, TX
 
1,530

 
944

 
1,394

 
—

 
2,338

 
28

 
3/14/2012
 
2001
 
Fort Smith, AR
 
1,620

 
1,017

 
1,558

 
—

 
2,575

 
32

 
3/14/2012
 
1999
 
Fort Wayne, IN
 
1,570

 
701

 
1,806

 
—

 
2,507

 
37

 
3/14/2012
 
2000
 
Garner, NC
 
1,580

 
1,005

 
1,508

 
—

 
2,513

 
30

 
3/14/2012
 
2004
 
Houston, TX
 
1,620

 
1,076

 
1,449

 
—

 
2,525

 
29

 
3/14/2012
 
1998
 
Independence, OH
 
 (f)

 
695

 
1,398

 
—

 
2,093

 
28

 
3/14/2012
 
2006
 
Jacksonville, FL
 
1,620

 
836

 
1,601

 
—

 
2,437

 
32

 
3/14/2012
 
2001
 
Las Cruces, NM
 
1,120

 
491

 
1,299

 
—

 
1,790

 
26

 
3/14/2012
 
2000
 
Lees Summit, MO
 
920

 
522

 
921

 
—

 
1,443

 
19

 
3/14/2012
 
1999
 
Lexington, KY
 
1,820

 
1,153

 
1,587

 
—

 
2,740

 
32

 
3/14/2012
 
2002
 
McAllen, TX
 
770

 
426

 
665

 
—

 
1,091

 
13

 
3/14/2012
 
1999
 
Newport News, VA
 
2,060

 
1,577

 
1,430

 
—

 
3,007

 
29

 
3/14/2012
 
1993
 
Pittsburg, PA
 
1,630

 
999

 
1,627

 
—

 
2,626

 
33

 
3/14/2012
 
1995
 
Sebring , FL
 
1,470

 
810

 
1,617

 
—

 
2,427

 
33

 
3/14/2012
 
2001
 
Southgate, MI
 
1,680

 
809

 
2,010

 
—

 
2,819

 
41

 
3/14/2012
 
1994
 
Winchester, VA
 
2,190

 
1,508

 
1,848

 
—

 
3,356

 
37

 
3/14/2012
 
2006
Oxford Exchange
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oxford, GA
 
 (f)

 
3,946

 
37,509

 
494

 
41,949

 
1,870

 
4/18/2011
 
2006
Owens Corning
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Newark, OH
 
 (f)

 
499

 
9,537

 
—

 
10,036

 
366

 
7/8/2011
 
2007
Petco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dardenne Prairie, MO
 
 (f)

 
781

 
1,525

 
—

 
2,306

 
81

 
2/22/2011
 
2009
 
Lake Charles, LA
 
2,145

 
412

 
2,852

 
—

 
3,264

 
168

 
10/25/2010
 
2008
Petsmart
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bellingham, WA
 
2,526

 
1,019

 
2,286

 
—

 
3,305

 
45

 
4/30/2012
 
1993
 
Boca Raton, FL
 
 (f)

 
3,379

 
3,748

 
—

 
7,127

 
148

 
7/21/2011
 
2001
 
Braintree, MA
 
 (f)

 
3,539

 
4,775

 
—

 
8,314

 
196

 
7/21/2011
 
1996
 
Dallas, TX
 
 (f)

 
901

 
3,858

 
—

 
4,759

 
146

 
7/21/2011
 
1998

S-16

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Petsmart (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Evanston, IL
 
$ (f)

 
$
792

 
$
5,522

 
$
—

 
$
6,314

 
$
208

 
7/21/2011
 
2001
 
Flint, MI
 
 (f)

 
565

 
2,986

 
—

 
3,551

 
153

 
7/21/2011
 
1996
 
Lake Mary, FL
 
 (f)

 
2,035

 
2,323

 
—

 
4,358

 
99

 
7/21/2011
 
1997
 
Oxon Hill, MD
 
 (f)

 
2,426

 
2,993

 
—

 
5,419

 
125

 
7/21/2011
 
1998
 
Parma, OH
 
 (f)

 
866

 
2,848

 
—

 
3,714

 
103

 
8/4/2011
 
1996
 
Phoenix, AZ
 
51,250

 
3,750

 
80,003

 
304

 
84,057

 
3,166

 
8/23/2011
 
2008
 
Plantation, FL
 
 (f)

 
1,077

 
3,868

 
—

 
4,945

 
153

 
7/21/2011
 
2001
 
Southlake, TX
 
 (f)

 
2,653

 
3,748

 
—

 
6,401

 
143

 
7/21/2011
 
1998
 
Tallahassee, FL
 
 (f)

 
1,221

 
1,341

 
—

 
2,562

 
65

 
7/21/2011
 
1998
 
Westlake Village, CA
 
 (f)

 
1,892

 
4,908

 
—

 
6,800

 
208

 
7/21/2011
 
1998
Petsmart/Hallmark
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cincinnati, OH
 
—

 
942

 
3,417

 
—

 
4,359

 
99

 
2/14/2012
 
1998
Petsmart/Bevmo
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redding, CA
 
3,206

 
1,185

 
3,484

 
—

 
4,669

 
76

 
3/21/2012
 
1989
Petsmart/Travos Credit Union
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mercad, CA
 
2,974

 
1,389

 
3,135

 
—

 
4,524

 
69

 
3/21/2012
 
1993
Pick N Save Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wauwatosa, WI
 
—

 
2,787

 
12,081

 
—

 
14,868

 
14

 
12/21/2012
 
2012
Pier 1 Imports
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Victoria, TX
 
—

 
390

 
1,500

 
—

 
1,890

 
19

 
7/2/2012
 
2011
Pinehurst Square West
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bismark, ND
 
 (f)

 
3,690

 
5,564

 
—

 
9,254

 
420

 
1/28/2011
 
2006
PLS Financial Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Calumet Park, IL
 
 (f)

 
165

 
959

 
—

 
1,124

 
35

 
8/18/2011
 
2005
 
Chicago (Diversey), IL
 
 (f)

 
301

 
566

 
—

 
867

 
20

 
8/18/2011
 
2001
 
Compton, CA
 
 (f)

 
1,054

 
221

 
—

 
1,275

 
7

 
10/26/2011
 
2005
 
Dallas (Camp Wisdom), TX
 
 (f)

 
283

 
351

 
—

 
634

 
13

 
8/18/2011
 
1983
 
Dallas (Davis), TX
 
 (f)

 
156

 
619

 
—

 
775

 
23

 
8/18/2011
 
2003
 
Fort Worth, TX
 
 (f)

 
181

 
688

 
—

 
869

 
25

 
8/18/2011
 
2003
 
Grand Prairie, TX
 
 (f)

 
479

 
123

 
—

 
602

 
6

 
8/18/2011
 
1971
 
Houston, TX
 
 (f)

 
175

 
262

 
—

 
437

 
11

 
8/18/2011
 
2005
 
Kenosha, WI
 
 (f)

 
120

 
521

 
—

 
641

 
19

 
8/18/2011
 
2005
 
Mesa (Broadway), AZ
 
 (f)

 
225

 
394

 
—

 
619

 
15

 
8/18/2011
 
2006
 
Mesquite, TX
 
 (f)

 
197

 
712

 
—

 
909

 
26

 
8/18/2011
 
2006
 
Phoenix, AZ
 
 (f)

 
183

 
670

 
—

 
853

 
19

 
11/4/2011
 
2006
 
Tucson, AZ
 
 (f)

 
278

 
467

 
—

 
745

 
18

 
8/18/2011
 
2005
Prairie Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oswego, IL
 
12,500

 
12,997

 
10,840

 
106

 
23,943

 
646

 
12/3/2010
 
(g)
Publix
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mountain Brook, AL
 
3,275

 
2,492

 
2,830

 
—

 
5,322

 
231

 
12/1/2009
 
2004
RaceTrac
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Atlanta, GA
 
 (f)

 
989

 
1,074

 
—

 
2,063

 
31

 
12/21/2011
 
2004
 
Belleview, FL
 
 (f)

 
882

 
2,712

 
—

 
3,594

 
79

 
12/21/2011
 
2007
 
Bessemer, AL
 
 (f)

 
982

 
1,703

 
—

 
2,685

 
50

 
12/21/2011
 
2003
 
Denton, TX
 
 (f)

 
960

 
1,690

 
—

 
2,650

 
48

 
12/21/2011
 
2003
 
Houston (Hwy 6N), TX
 
 (f)

 
888

 
950

 
—

 
1,838

 
27

 
12/21/2011
 
1995
 
Houston (Kuykendahl), TX
 
 (f)

 
1,043

 
1,036

 
—

 
2,079

 
30

 
12/21/2011
 
1997
 
Jacksonville, FL
 
 (f)

 
1,178

 
2,462

 
—

 
3,640

 
73

 
12/21/2011
 
2011
 
Leesburg, FL
 
 (f)

 
1,185

 
2,375

 
—

 
3,560

 
70

 
12/21/2011
 
2007
 
Mobile, AL
 
 (f)

 
650

 
908

 
—

 
1,558

 
26

 
12/21/2011
 
1998
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

S-17

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)




 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Red Oak Village
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
San Marcos, TX
 
$
12,480

 
$
4,222

 
$
16,434

 
$
—

 
$
20,656

 
$
1,004

 
12/23/2010
 
2008
Riverside Centre
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
St. Augustine, FL
 
 (f)

 
1,368

 
3,148

 
267

 
4,783

 
150

 
6/8/2011
 
2007
Road Ranger
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Winnebago, IL
 
—

 
638

 
3,129

 
—

 
3,767

 
30

 
8/30/2012
 
1998
RSA Security
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bedford, MA
 
51,400

 
13,692

 
67,747

 
—

 
81,439

 
1,024

 
7/25/2012
 
2001
Ryan’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asheville, NC
 
—

 
1,177

 
1,233

 
—

 
2,410

 
58

 
4/29/2011
 
1996
 
Beckley, WV
 
—

 
1,102

 
1,307

 
—

 
2,409

 
61

 
4/29/2011
 
1995
 
Columbus, GA
 
—

 
1,394

 
1,325

 
—

 
2,719

 
61

 
4/29/2011
 
2002
 
Commerce, GA
 
—

 
817

 
946

 
—

 
1,763

 
44

 
4/29/2011
 
1996
 
Jasper, AL
 
—

 
663

 
1,439

 
—

 
2,102

 
66

 
4/29/2011
 
2000
 
Owensboro, KY
 
—

 
1,239

 
893

 
—

 
2,132

 
41

 
4/29/2011
 
1997
 
Paducah, KY
 
—

 
1,013

 
858

 
—

 
1,871

 
40

 
4/29/2011
 
1995
 
Pearl, MS
 
—

 
913

 
1,135

 
—

 
2,048

 
53

 
4/29/2011
 
2000
 
Prattville, AL
 
—

 
876

 
1,125

 
—

 
2,001

 
52

 
4/29/2011
 
1997
 
Rome, GA
 
—

 
919

 
682

 
—

 
1,601

 
35

 
4/29/2011
 
1983
 
Sevierville, TN
 
—

 
725

 
673

 
—

 
1,398

 
31

 
4/29/2011
 
2003
 
Texas City, TX
 
—

 
677

 
1,593

 
—

 
2,270

 
73

 
4/29/2011
 
2002
Sam’s Club
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Colorado Springs, CO
 
9,581

 
2,626

 
10,817

 
—

 
13,443

 
358

 
1/20/2012
 
1998
 
Douglasville, GA
 
 (f)

 
2,016

 
9,290

 
—

 
11,306

 
416

 
7/28/2011
 
1999
 
Hoover, AL
 
 (f)

 
2,083

 
9,223

 
—

 
11,306

 
1,013

 
1/15/2009
 
2000
Santa Rosa Commons
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pace, FL
 
13,000

 
2,887

 
19,811

 
112

 
22,810

 
892

 
6/30/2011
 
2008
San Tan Marketplace
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gilbert, AZ
 
27,400

 
10,800

 
40,312

 
—

 
51,112

 
885

 
3/30/2012
 
2005
Shelby Corners
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Utica, MI
 
 (f)

 
957

 
2,753

 
—

 
3,710

 
128

 
7/8/2011
 
2008
Sherwin Williams
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Muskegon, MI
 
 (f)

 
158

 
880

 
—

 
1,038

 
49

 
12/10/2010
 
2008
Sherwood Retail Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sherwood, AR
 
—

 
2,143

 
3,198

 
—

 
5,341

 
63

 
6/4/2012
 
2005
Shoppes at Port Arthur
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Port Arthur, TX
 
8,077

 
2,618

 
11,463

 
—

 
14,081

 
741

 
10/12/2010
 
2008
Shoppes at Sherbrooke
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lake Worth, FL
 
—

 
3,161

 
5,609

 
55

 
8,825

 
115

 
4/27/2012
 
2004
Shoppes at Sugarmill Woods
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Homosassa, FL
 
—

 
882

 
5,381

 
112

 
6,375

 
166

 
12/13/2011
 
2008
Silverado Plaza
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tucson, AZ
 
4,701

 
1,893

 
6,914

 
—

 
8,807

 
204

 
12/22/2011
 
1998
Sprouts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Centennial, CO
 
—

 
1,692

 
6,070

 
—

 
7,762

 
22

 
11/14/2012
 
2009
Staples
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Houston, TX
 
1,815

 
1,020

 
2,232

 
—

 
3,252

 
151

 
6/17/2010
 
2008
 
Iowa City, IA
 
—

 
1,223

 
2,201

 
—

 
3,424

 
190

 
11/13/2009
 
2009
 
Pensacola, FL
 
 (f)

 
1,503

 
2,011

 
—

 
3,514

 
125

 
1/6/2011
 
2010
Stearns Crossing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bartlett, IL
 
7,060

 
3,733

 
7,649

 
76

 
11,458

 
484

 
12/9/2010
 
1999

S-18

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
St. Luke’s Urgent Care
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Creve Coeur, MO
 
 $ (f)

 
$
1,067

 
$
3,867

 
$
—

 
$
4,934

 
$
185

 
5/20/2011
 
2010
Stop & Shop
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cranston, RI
 
(f)

 
13,301

 
—

 
—

 
13,301

 
—

 
8/5/2011
 
(g)
 
Stamford, CT
 
14,900

 
12,881

 
14,592

 
—

 
27,473

 
926

 
7/30/2010
 
2006
Stripes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Andrews, TX
 
 (f)

 
110

 
1,777

 
—

 
1,887

 
137

 
12/30/2009
 
2008
 
Brady, TX
 
—

 
205

 
2,628

 
—

 
2,833

 
30

 
8/30/2012
 
2007
 
Brownsville, TX
 
—

 
561

 
2,715

 
—

 
3,276

 
31

 
8/30/2012
 
2007
 
Carrizo Springs, TX
 
 (f)

 
400

 
2,221

 
—

 
2,621

 
125

 
11/22/2010
 
2010
 
Corpus Christi (Everh), TX
 
—

 
882

 
2,645

 
—

 
3,527

 
30

 
8/30/2012
 
2007
 
Corpus Christi (Padre), TX
 
—

 
700

 
2,689

 
—

 
3,389

 
31

 
8/30/2012
 
2007
 
Corpus Christi, TX
 
—

 
684

 
1,606

 
—

 
2,290

 
20

 
8/30/2012
 
2007
 
Eagle Pass, TX
 
 (f)

 
656

 
1,897

 
—

 
2,553

 
122

 
6/29/2010
 
2009
 
Edinburg (Hwy 107), TX
—

 
405

 
2,419

 
—

 
2,824

 
28

 
8/30/2012
 
2007
 
Edinburg (Raul), TX
 
—

 
408

 
1,997

 
—

 
2,405

 
23

 
8/30/2012
 
2007
 
Edinburg, TX
 
 (f)

 
906

 
1,259

 
—

 
2,165

 
81

 
6/29/2010
 
1999
 
Fort Stockton, TX
 
 (f)

 
1,035

 
3,319

 
—

 
4,354

 
284

 
12/30/2010
 
2010
 
Haskell, TX
 
 (f)

 
93

 
2,130

 
—

 
2,223

 
121

 
11/22/2010
 
2010
 
Houston, TX
 
—

 
878

 
1,676

 
—

 
2,554

 
22

 
8/30/2012
 
2007
 
LaFeria, TX
 
 (f)

 
321

 
1,271

 
—

 
1,592

 
99

 
12/30/2009
 
2008
 
Laredo (La Pita Mangana), TX
 
 (f)

 
419

 
1,741

 
—

 
2,160

 
99

 
11/22/2010
 
2010
 
Laredo (Willow), TX
 
 (f)

 
438

 
1,785

 
—

 
2,223

 
74

 
8/3/2011
 
2010
 
Midland, TX
 
—

 
1,152

 
3,945

 
—

 
5,097

 
44

 
8/30/2012
 
2006
 
Mission, TX
 
—

 
1,009

 
2,238

 
—

 
3,247

 
26

 
8/30/2012
 
2003
 
Odessa (Kermit), TX
 
—

 
733

 
5,594

 
—

 
6,327

 
58

 
8/30/2012
 
1998
 
Odessa, TX
 
 (f)

 
139

 
2,175

 
—

 
2,314

 
186

 
6/30/2011
 
2011
 
Palmhurst, TX
 
 (f)

 
467

 
448

 
—

 
915

 
29

 
6/29/2010
 
1986
 
Pharr, TX
 
 (f)

 
384

 
1,712

 
—

 
2,096

 
133

 
12/30/2009
 
1997
 
Portales, NM
 
 (f)

 
313

 
1,913

 
—

 
2,226

 
184

 
12/30/2010
 
2010
 
Rio Hondo, TX
 
 (f)

 
273

 
1,840

 
—

 
2,113

 
141

 
12/30/2009
 
2007
 
San Angelo (Sherwood), TX
—

 
958

 
2,704

 
—

 
3,662

 
32

 
8/30/2012
 
2007
 
San Angelo, TX
 
—

 
601

 
3,609

 
—

 
4,210

 
38

 
8/30/2012
 
1997
 
San Benito (Ranchito), TX
 
 (f)

 
401

 
1,967

 
—

 
2,368

 
126

 
6/29/2010
 
2010
Sunset Valley Shopping Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Austin, TX
 
17,441

 
10,249

 
19,345

 
131

 
29,725

 
1,460

 
3/26/2010
 
2007
Sysmex
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lincolnshire, IL
 
22,500

 
3,778

 
41,462

 
736

 
45,976

 
58

 
8/31/2012
 
2010
Telegraph Plaza
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Monroe, MI
 
—

 
1,076

 
5,059

 
—

 
6,135

 
253

 
6/30/2011
 
2006
The Crossing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Killeen, TX
 
 (f)

 
1,280

 
6,767

 
(35
)
 
8,012

 
284

 
7/20/2011
 
2011
The Forum
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Myers, FL
 
 (f)

 
8,091

 
20,504

 
—

 
28,595

 
949

 
7/22/2011
 
2008
The Medicines Company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parsippany, NJ
 
27,700

 
4,195

 
39,488

 
23

 
43,706

 
1,066

 
2/27/2012
 
2009
The Plaza
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Queen Creek, AZ
 
7,290

 
2,659

 
9,523

 
—

 
12,182

 
418

 
8/12/2011
 
2007
Thornton’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bloomington, IL
 
953

 
777

 
1,031

 
—

 
1,808

 
58

 
12/17/2010
 
1992

S-19

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Thorton’s (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Clarksville, IN
 
$
1,007

 
$
894

 
$
948

 
$
—

 
$
1,842

 
$
53

 
12/17/2010
 
2005
 
Edinburgh, IN
 
1,047

 
780

 
1,138

 
—

 
1,918

 
67

 
12/17/2010
 
1997
 
Evansville (Rosenberger), IN
 
1,032

 
727

 
1,039

 
—

 
1,766

 
63

 
12/17/2010
 
2007
 
Evansville, IN
 
1,082

 
674

 
1,040

 
—

 
1,714

 
65

 
12/17/2010
 
1998
 
Franklin Park, IL
 
1,628

 
1,427

 
1,373

 
—

 
2,800

 
79

 
12/17/2010
 
1999
 
Galloway, OH
 
953

 
578

 
1,134

 
—

 
1,712

 
66

 
12/17/2010
 
1998
 
Henderson (Green), KY
 
1,007

 
702

 
1,031

 
—

 
1,733

 
62

 
12/17/2010
 
2009
 
Henderson, KY
 
1,975

 
1,212

 
2,089

 
—

 
3,301

 
119

 
12/17/2010
 
2007
 
Jeffersonville, IN
 
1,439

 
1,475

 
1,057

 
—

 
2,532

 
64

 
12/17/2010
 
1995
 
Joliet, IL
 
1,761

 
1,209

 
1,789

 
—

 
2,998

 
101

 
12/17/2010
 
2000
 
Louisville, KY
 
1,037

 
684

 
1,154

 
—

 
1,838

 
66

 
12/17/2010
 
1994
 
Oaklawn, IL
 
1,111

 
1,233

 
667

 
—

 
1,900

 
42

 
12/17/2010
 
1994
 
Ottawa, IL
 
1,300

 
599

 
1,751

 
—

 
2,350

 
98

 
12/17/2010
 
2006
 
Plainfield, IL
 
1,102

 
829

 
1,166

 
—

 
1,995

 
67

 
12/17/2010
 
2005
 
Roselle, IL
 
1,399

 
926

 
1,425

 
—

 
2,351

 
83

 
12/17/2010
 
1996
 
Shelbyville, KY
 
1,116

 
533

 
1,356

 
—

 
1,889

 
81

 
12/17/2010
 
2007
 
South Elgin, IL
 
1,628

 
1,452

 
1,278

 
—

 
2,730

 
74

 
12/17/2010
 
2007
 
Springfield, IL
 
1,915

 
1,221

 
2,053

 
—

 
3,274

 
116

 
12/17/2010
 
2008
 
Summit, IL
 
1,116

 
1,316

 
662

 
—

 
1,978

 
37

 
12/17/2010
 
2000
 
Terre Haute, IN
 
1,350

 
908

 
1,409

 
(37
)
 
2,280

 
83

 
12/17/2010
 
1999
 
Waukegan, IL
 
1,161

 
797

 
1,199

 
—

 
1,996

 
68

 
12/17/2010
 
1999
 
Westmont, IL
 
1,881

 
1,150

 
1,926

 
—

 
3,076

 
110

 
12/17/2010
 
1997
Tire Kingdom
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Auburndale, FL
 
1,205

 
625

 
1,487

 
—

 
2,112

 
94

 
7/20/2010
 
2010
Toys R Us/Mr. Hero
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parma, OH
 
—

 
1,192

 
2,151

 
—

 
3,343

 
60

 
4/11/2012
 
1986
Toys R Us/Babies R Us
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Coral Springs, FL
 
—

 
2,507

 
4,675

 
—

 
7,182

 
43

 
9/27/2012
 
2010
Tractor Supply
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alamogordo, NM
 
1,943

 
529

 
2,188

 
—

 
2,717

 
41

 
4/20/2012
 
2011
 
Alton, IL
 
1,404

 
419

 
2,009

 
—

 
2,428

 
129

 
8/13/2010
 
2008
 
Augusta, ME
 
1,423

 
362

 
2,121

 
—

 
2,483

 
133

 
10/12/2010
 
2009
 
Bainbridge, GA
 
 (f)

 
456

 
1,812

 
—

 
2,268

 
60

 
11/16/2011
 
2008
 
Ballinger, TX
 
1,248

 
369

 
1,841

 
—

 
2,210

 
130

 
5/21/2010
 
2010
 
Belchertown, MA
 
1,823

 
1,001

 
2,149

 
—

 
3,150

 
160

 
6/29/2010
 
2008
 
Columbia, SC
 
 (f)

 
773

 
1,794

 
—

 
2,567

 
41

 
3/30/2012
 
2011
 
Del Rio, TX
 
1,113

 
657

 
1,387

 
—

 
2,044

 
131

 
7/27/2009
 
2009
 
Dixon, CA
 
2,962

 
848

 
3,528

 
—

 
4,376

 
223

 
9/24/2010
 
2007
 
Edinburg, TX
 
1,451

 
571

 
2,051

 
—

 
2,622

 
190

 
7/27/2009
 
2009
 
Franklin, NC
 
1,480

 
422

 
1,914

 
—

 
2,336

 
118

 
11/30/2010
 
2009
 
Gibsonia, PA
 
1,648

 
726

 
2,074

 
—

 
2,800

 
155

 
5/5/2010
 
2010
 
Glenpool, OK
 
1,180

 
174

 
1,941

 
—

 
2,115

 
137

 
5/4/2010
 
2009
 
Gloucester, NJ
 
2,600

 
1,590

 
2,962

 
—

 
4,552

 
253

 
12/17/2009
 
2009
 
Grayson, KY
 
 (f)

 
406

 
1,967

 
—

 
2,373

 
76

 
6/30/2011
 
2011
 
Hamilton, OH
 
932

 
418

 
1,045

 
—

 
1,463

 
70

 
9/17/2010
 
1975
 
Irmo, SC
 
1,125

 
697

 
1,501

 
—

 
2,198

 
165

 
10/15/2009
 
2009
 
Jackson, CA
 
—

 
1,062

 
3,620

 
—

 
4,682

 
4

 
12/18/2012
 
2012
 
Jefferson City, MO
 
1,125

 
398

 
1,269

 
—

 
1,667

 
76

 
11/9/2010
 
2009
 
Kenedy, TX
 
1,220

 
215

 
1,985

 
—

 
2,200

 
144

 
4/29/2010
 
2009
 
Lawrence, KS
 
1,377

 
427

 
2,016

 
—

 
2,443

 
119

 
9/24/2010
 
2010
 
Little Rock, AR
 
1,500

 
834

 
1,223

 
—

 
2,057

 
74

 
11/9/2010
 
2009

S-20

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Tractor Supply (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Middletown, DE
 
$
—

 
$
1,306

 
$
2,703

 
$
—

 
$
4,009

 
$
42

 
6/29/2012
 
2007
 
Mishawaka, IN
 
 (f)

 
450

 
1,856

 
—

 
2,306

 
60

 
11/18/2011
 
2011
 
Murphy, NC
 
1,402

 
789

 
1,580

 
—

 
2,369

 
120

 
5/21/2010
 
2010
 
Nixa, MO
 
1,346

 
430

 
1,697

 
—

 
2,127

 
101

 
9/24/2010
 
2009
 
Pearsall, TX
 
1,199

 
120

 
2,117

 
—

 
2,237

 
154

 
4/9/2010
 
2009
 
Rincon, GA
 
 (f)

 
678

 
1,509

 
—

 
2,187

 
65

 
8/23/2011
 
2007
 
Roswell, TX
 
1,180

 
728

 
1,469

 
—

 
2,197

 
138

 
7/27/2009
 
2009
 
Sedalia, MO
 
1,090

 
414

 
1,567

 
—

 
1,981

 
87

 
12/10/2010
 
2010
 
Sellersburg, IN
 
1,433

 
815

 
1,426

 
—

 
2,241

 
89

 
9/13/2010
 
2010
 
Southwick, MA
 
2,428

 
1,521

 
2,261

 
—

 
3,782

 
169

 
6/29/2010
 
2008
 
St. John, IN
 
2,247

 
360

 
3,445

 
—

 
3,805

 
235

 
7/28/2010
 
2007
 
Stillwater, OK
 
1,205

 
163

 
1,999

 
—

 
2,162

 
141

 
5/4/2010
 
2008
 
Summerdale, AL
 
1,210

 
238

 
1,783

 
—

 
2,021

 
139

 
4/14/2010
 
2010
 
Troy, MO
 
1,286

 
623

 
1,529

 
—

 
2,152

 
100

 
8/13/2010
 
2009
 
Tuscaloosa, AL
 
—

 
641

 
1,951

 
—

 
2,592

 
7

 
11/21/2012
 
2012
 
Union, MO
 
1,404

 
512

 
1,784

 
—

 
2,296

 
115

 
8/13/2010
 
2008
 
Wauseon, OH
 
1,374

 
596

 
1,563

 
—

 
2,159

 
110

 
9/13/2010
 
2007
Trader Joe’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lexington, KY
 
3,519

 
2,431

 
3,233

 
—

 
5,664

 
48

 
7/17/2012
 
2012
 
Sarasota, FL
 
—

 
1,748

 
4,959

 
—

 
6,707

 
43

 
9/25/2012
 
2008
Tutor Time
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Austin, TX
 
 (f)

 
216

 
1,445

 
—

 
1,661

 
88

 
12/15/2010
 
2000
 
Downingtown, PA
 
 (f)

 
143

 
1,473

 
—

 
1,616

 
84

 
12/15/2010
 
1998
Ulta Salon
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jackson, TN
 
1,454

 
557

 
1,832

 
—

 
2,389

 
127

 
11/5/2010
 
2010
 
Fort Gratiot, MI
 
1,104

 
289

 
1,382

 
—

 
1,671

 
19

 
6/29/2012
 
2012
United Technologies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bradenton, FL
 
10,050

 
2,094

 
16,618

 
—

 
18,712

 
541

 
12/8/2011
 
2004
University Plaza
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Flagstaff, AZ
 
8,350

 
3,008

 
11,545

 
845

 
15,398

 
1,130

 
11/17/2009
 
1982
USAA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fayetteville, NC
 
—

 
636

 
1,512

 
—

 
2,148

 
16

 
8/29/2012
 
2012
VA Clinic
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oceanside, CA
 
27,750

 
4,373

 
36,082

 
—

 
40,455

 
1,027

 
12/22/2011
 
2010
Valley Blend
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Huntsville, AL
 
—

 
9,051

 
55,664

 
—

 
64,715

 
63

 
12/19/2012
 
2001
Volusia Square
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Daytona Beach, FL
 
16,557

 
7,004

 
22,427

 
(25
)
 
29,406

 
1,495

 
11/12/2010
 
2010
Walgreens
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Albuquerque, NM
 
 (f)

 
1,066

 
1,870

 
76

 
3,012

 
54

 
11/17/2011
 
1996
 
Anthony, TX
 
 (f)

 
1,125

 
2,831

 
—

 
3,956

 
112

 
8/29/2011
 
2008
 
Appleton (Meade), WI
 
1,880

 
885

 
2,505

 
—

 
3,390

 
183

 
2/3/2010
 
2008
 
Appleton(Northland), WI
2,736

 
1,385

 
3,249

 
—

 
4,634

 
237

 
2/18/2010
 
2008
 
Augusta, ME
 
3,157

 
2,271

 
3,172

 
—

 
5,443

 
231

 
3/5/2010
 
2007
 
Bartlett, TN
 
 (f)

 
1,716

 
1,516

 
—

 
3,232

 
58

 
8/1/2011
 
2001
 
Baytown, TX
 
2,480

 
1,151

 
2,786

 
—

 
3,937

 
208

 
2/23/2010
 
2009
 
Beloit, WI
 
2,184

 
763

 
3,064

 
—

 
3,827

 
205

 
5/20/2010
 
2008
 
Birmingham, AL
 
1,560

 
660

 
2,015

 
—

 
2,675

 
152

 
3/30/2010
 
1999
 
Brooklyn Park, MD
 
2,226

 
1,323

 
3,301

 
—

 
4,624

 
254

 
12/23/2009
 
2008
 
Brownwood, TX
 
 (f)

 
1,511

 
3,527

 
—

 
5,038

 
165

 
3/30/2011
 
2008
 
Cape Carteret, NC
 
2,400

 
971

 
2,461

 
—

 
3,432

 
99

 
8/15/2011
 
2008
 
Chicago (79th St.), IL
 
 (f)

 
976

 
2,116

 
—

 
3,092

 
87

 
5/5/2011
 
2003

S-21

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Walgreens (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chicago (N. Canfield), IL
 
 $ (f)

 
$
818

 
$
3,317

 
$
—

 
$
4,135

 
$
143

 
4/28/2011
 
2000
 
Chickasha, TX
 
1,869

 
746

 
2,900

 
—

 
3,646

 
245

 
10/14/2009
 
2007
 
Clarkston, MI
 
(f)

 
1,506

 
2,885

 
—

 
4,391

 
111

 
6/24/2011
 
2001
 
Cleveland (Clark), OH
 
2,692

 
451

 
4,312

 
—

 
4,763

 
313

 
2/10/2010
 
2008
 
Country Club Hills, MO
 
 (f)

 
717

 
3,697

 
—

 
4,414

 
168

 
3/9/2011
 
2009
 
Decatur, GA
 
 (f)

 
1,490

 
2,167

 
—

 
3,657

 
96

 
5/5/2011
 
2001
 
Denton, TX
 
—

 
887

 
3,535

 
—

 
4,422

 
310

 
7/24/2009
 
2009
 
Dubuque, IA
 
 (f)

 
825

 
3,259

 
—

 
4,084

 
122

 
8/12/2011
 
2008
 
Durham (Guess), NC
 
2,871

 
1,315

 
3,225

 
—

 
4,540

 
203

 
7/20/2010
 
2010
 
Durham (Highway 54), NC
 
2,849

 
2,067

 
2,827

 
—

 
4,894

 
197

 
4/28/2010
 
2008
 
Edmond, OK
 
2,250

 
901

 
2,656

 
—

 
3,557

 
263

 
7/7/2009
 
2000
 
Elgin, IL
 
2,260

 
1,561

 
2,469

 
—

 
4,030

 
192

 
12/30/2009
 
2002
 
Fayetteville, NC
 
 (f)

 
916

 
4,118

 
—

 
5,034

 
216

 
12/30/2010
 
2009
 
Fort Mill, SC
 
2,272

 
1,137

 
2,532

 
—

 
3,669

 
166

 
6/24/2010
 
2010
 
Framingham, MA
 
3,046

 
2,234

 
2,852

 
—

 
5,086

 
220

 
1/19/2010
 
2007
 
Fredericksburg, VA
 
3,773

 
2,729

 
4,072

 
—

 
6,801

 
405

 
1/9/2009
 
2008
 
Goose Creek, SC
 
2,700

 
1,277

 
3,240

 
—

 
4,517

 
267

 
10/29/2009
 
2009
 
Grand Junction , CO
 
—

 
1,041

 
3,215

 
—

 
4,256

 
271

 
9/30/2009
 
2009
 
Grayson, GA
 
2,720

 
1,129

 
2,965

 
—

 
4,094

 
157

 
12/7/2010
 
2004
 
Greenville, NC
 
3,030

 
645

 
3,532

 
—

 
4,177

 
261

 
2/19/2010
 
2009
 
Independence, MO
 
 (f)

 
1,240

 
2,436

 
—

 
3,676

 
105

 
5/5/2011
 
2001
 
Indianapolis, IN
 
—

 
842

 
4,798

 
—

 
5,640

 
476

 
1/6/2009
 
2008
 
Janesville (W Court), WI
2,235

 
689

 
3,099

 
—

 
3,788

 
213

 
4/13/2010
 
2010
 
Janesville, WI
 
2,640

 
1,423

 
3,776

 
—

 
5,199

 
291

 
12/18/2009
 
2008
 
Kingman, AZ
 
2,997

 
839

 
4,369

 
—

 
5,208

 
318

 
2/25/2010
 
2009
 
La Crosse, WI
 
 (f)

 
1,638

 
3,107

 
—

 
4,745

 
128

 
5/6/2011
 
2009
 
Lafayette, IN
 
2,350

 
635

 
2,425

 
—

 
3,060

 
111

 
3/31/2011
 
2008
 
Lancaster (Palmdale), CA
2,719

 
1,349

 
3,219

 
—

 
4,568

 
216

 
5/17/2010
 
2009
 
Lancaster, SC
 
2,980

 
2,021

 
2,970

 
—

 
4,991

 
219

 
2/19/2010
 
2009
 
Leland, NC
 
2,472

 
1,252

 
2,835

 
—

 
4,087

 
179

 
7/15/2010
 
2008
 
Liberty Township, OH
 
 (f)

 
1,353

 
3,285

 
—

 
4,638

 
153

 
3/31/2011
 
2011
 
Loves Park, IL
 
1,767

 
892

 
2,644

 
—

 
3,536

 
199

 
1/19/2010
 
2008
 
Machesney Park, IL
 
1,869

 
875

 
2,918

 
—

 
3,793

 
225

 
12/16/2009
 
2008
 
Madisonville, KY
 
 (f)

 
1,083

 
2,517

 
—

 
3,600

 
101

 
6/28/2011
 
2007
 
Matteson, IL
 
2,450

 
430

 
3,246

 
—

 
3,676

 
174

 
11/30/2010
 
2008
 
Medina, OH
 
 (f)

 
829

 
2,966

 
—

 
3,795

 
126

 
5/5/2011
 
2001
 
Muscatine, IA
 
 (f)

 
532

 
2,450

 
—

 
2,982

 
105

 
5/5/2011
 
2001
 
New Albany, OR
 
 (f)

 
1,095

 
2,533

 
—

 
3,628

 
136

 
12/2/2010
 
2006
 
North Mankato, MN
 
2,530

 
1,841

 
2,572

 
—

 
4,413

 
182

 
3/18/2010
 
2008
 
North Platte, NE
 
2,328

 
1,123

 
3,367

 
—

 
4,490

 
246

 
2/23/2010
 
2009
 
Omaha, NE
 
2,580

 
1,183

 
3,734

 
—

 
4,917

 
273

 
2/25/2010
 
2009
 
Papillion, NE
 
1,967

 
1,039

 
2,731

 
—

 
3,770

 
222

 
10/6/2009
 
2009
 
Pueblo, CO
 
 (f)

 
510

 
2,651

 
—

 
3,161

 
138

 
12/7/2010
 
2003
 
Roanoke, VA
 
 (f)

 
1,042

 
3,923

 
—

 
4,965

 
176

 
4/26/2011
 
2009
 
Rocky Mount, NC
 
2,995

 
1,419

 
3,516

 
—

 
4,935

 
236

 
5/26/2010
 
2009
 
South Bend (Ironwood), IN
 
3,120

 
1,538

 
3,657

 
—

 
5,195

 
283

 
12/21/2009
 
2006
 
South Bend, IN
 
—

 
1,234

 
3,245

 
—

 
4,479

 
255

 
11/18/2009
 
2007
 
Spearfish, SD
 
2,426

 
1,028

 
3,355

 
—

 
4,383

 
274

 
10/6/2009
 
2008
 
Springdale, AR
 
3,025

 
1,099

 
3,535

 
—

 
4,634

 
143

 
6/29/2011
 
2009
 
St. Charles, IL
 
2,030

 
1,457

 
2,243

 
—

 
3,700

 
175

 
12/30/2009
 
2002

S-22

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Walgreens (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stillwater, OK
 
$ (f)

 
$
562

 
$
2,903

 
$
8

 
$
3,473

 
$
289

 
7/21/2009
 
2000
 
Tucson (Harrison), AZ
 
2,910

 
1,415

 
3,075

 
—

 
4,490

 
160

 
12/7/2010
 
2004
 
Tucson (River), AZ
 
 (f)

 
1,353

 
3,390

 
—

 
4,743

 
186

 
11/12/2010
 
2003
 
Tulsa, OK
 
2,016

 
1,130

 
2,414

 
—

 
3,544

 
249

 
1/6/2009
 
2001
 
Twin Falls, ID
 
2,432

 
1,088

 
3,153

 
—

 
4,241

 
240

 
1/14/2010
 
2009
 
Union City, GA
 
 (f)

 
916

 
3,120

 
—

 
4,036

 
112

 
9/9/2011
 
2005
 
Warner Robins, GA
 
—

 
1,171

 
2,585

 
—

 
3,756

 
219

 
10/20/2009
 
2007
 
Watertown, NY
 
 (f)

 
2,696

 
2,545

 
—

 
5,241

 
117

 
7/26/2011
 
2006
 
Wichita, KS
 
 (f)

 
667

 
2,727

 
—

 
3,394

 
101

 
8/1/2011
 
2000
 
Wilmington, NC
 
 (f)

 
1,126

 
3,704

 
—

 
4,830

 
163

 
4/21/2011
 
2010
 
Xenia, OH
 
 (f)

 
840

 
3,575

 
—

 
4,415

 
112

 
10/4/2011
 
2009
Wal-Mart
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Albuquerque, NM
 
9,698

 
14,432

 
—

 
—

 
14,432

 
—

 
3/31/2009
 
(g)
 
Cary, NC
 
—

 
2,749

 
5,062

 
—

 
7,811

 
7

 
12/21/2012
 
2005
 
Douglasville, GA
 
 (f)

 
4,781

 
13,166

 
—

 
17,947

 
628

 
7/28/2011
 
1999
 
Lancaster, SC
 
—

 
2,664

 
10,223

 
—

 
12,887

 
359

 
12/21/2011
 
1999
 
Las Vegas , NV
 
7,925

 
13,237

 
—

 
—

 
13,237

 
—

 
3/31/2009
 
(g)
 
Pueblo, CO
 
8,250

 
1,877

 
10,162

 
—

 
12,039

 
679

 
11/12/2010
 
1998
 
Riverside, CA
 
55,000

 
12,078

 
72,714

 
—

 
84,792

 
2,676

 
7/25/2011
 
2011
Waterside Marketplace
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chesterfield, MI
 
19,350

 
8,078

 
15,727

 
911

 
24,716

 
1,463

 
12/20/2010
 
2007
WaWa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gap, PA
 
—

 
912

 
4,550

 
—

 
5,462

 
45

 
8/29/2012
 
2005
 
Portsmouth, VA
 
1,241

 
2,080

 
—

 
—

 
2,080

 
—

 
9/30/2010
 
(g)
Wells Fargo
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hillsboro, NH
 
13,500

 
8,088

 
15,955

 
—

 
24,043

 
1,247

 
12/8/2010
 
1979
Wendy’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Avon (10565 US36), IN
 
—

 
820

 
636

 
—

 
1,456

 
1

 
12/27/2012
 
1999
 
Avon (5201 US36), IN
 
—

 
686

 
596

 
—

 
1,282

 
1

 
12/27/2012
 
1990
 
Bellingham, WA
 
—

 
395

 
574

 
—

 
969

 
1

 
12/27/2012
 
1994
 
Bothell, WA
 
—

 
317

 
407

 
—

 
724

 
—

 
12/27/2012
 
2004
 
Carmel (116th St), IN
 
—

 
881

 
73

 
—

 
954

 
—

 
12/27/2012
 
1980
 
Carmel (Michigan Rd), IN
 
—

 
826

 
556

 
—

 
1,382

 
1

 
12/27/2012
 
2001
 
Fishers (116th St), IN
 
—

 
722

 
561

 
—

 
1,283

 
1

 
12/27/2012
 
1999
 
Fishers (Olivia), IN
 
—

 
559

 
652

 
—

 
1,211

 
1

 
12/27/2012
 
2012
 
Greenfield, IN
 
—

 
343

 
390

 
—

 
733

 
—

 
12/27/2012
 
1980
 
Henderson (Eastern), NV
—

 
589

 
643

 
—

 
1,232

 
1

 
12/27/2012
 
2000
 
Henderson (Green), NV
 
—

 
748

 
926

 
—

 
1,674

 
1

 
12/27/2012
 
1997
 
Henderson (Lake), NV
 
—

 
670

 
507

 
—

 
1,177

 
1

 
12/27/2012
 
1999
 
Indianapolis, IN
 
—

 
641

 
533

 
—

 
1,174

 
1

 
12/27/2012
 
1993
 
Las Vegas (Lake Mead), NV
 
—

 
460

 
609

 
—

 
1,069

 
1

 
12/27/2012
 
1995
 
Las Vegas (Nellis), NV
 
—

 
647

 
514

 
—

 
1,161

 
1

 
12/27/2012
 
1984
 
Las Vegas (Rancho), NV
 
—

 
755

 
809

 
—

 
1,564

 
1

 
12/27/2012
 
1991
 
Las Vegas (W Flamingo), NV
 
—

 
556

 
552

 
—

 
1,108

 
1

 
12/27/2012
 
1986
 
Las Vegas (Charleston), NV
 
—

 
761

 
625

 
—

 
1,386

 
1

 
12/27/2012
 
1976
 
Las Vegas (E. Flamingo), NV
 
—

 
319

 
539

 
—

 
858

 
1

 
12/27/2012
 
1976
 
Lebanon, IN
 
—

 
1,445

 
767

 
—

 
2,212

 
1

 
12/27/2012
 
2012
 
Noblesville, IN
 
—

 
546

 
69

 
—

 
615

 
—

 
12/27/2012
 
2012

S-23

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
Gross Amount at
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Which Carried
 
 
 
 
 
 
 
 
 
 
 
Initial Costs to Company
 
Total
 
At December 31,
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Buildings &
 
Adjustment
 
2012
 
Depreciation
 
Date
 
Date
Description (a)
 
Encumbrances
 
Land
 
Improvements
 
to Basis
 
 (b) (c)
 
(d) (e)
 
Acquired
 
Constructed
Wendy’s (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Port Angeles, WA
 
—

 
437

 
1,237

 
—

 
1,674

 
1

 
12/27/2012
 
1980
 
Redmond, WA
 
$
—

 
$
730

 
$
246

 
$
—

 
$
976

 
$
—

 
12/27/2012
 
1977
 
San Antonio (De Zavala), TX
 
—

 
927

 
520

 
—

 
1,447

 
1

 
12/27/2012
 
1995
 
San Antonio (Loop 410), TX
 
—

 
627

 
461

 
—

 
1,088

 
—

 
12/27/2012
 
1990
 
San Antonio (Southcross), TX
 
—

 
572

 
927

 
—

 
1,499

 
1

 
12/27/2012
 
1992
 
San Antonio (Stone Oak), TX
 
—

 
863

 
248

 
—

 
1,111

 
—

 
12/27/2012
 
2000
 
San Antonio, TX
 
—

 
1,108

 
244

 
—

 
1,352

 
—

 
12/27/2012
 
2003
 
San Marcos, TX
 
—

 
575

 
778

 
—

 
1,353

 
1

 
12/27/2012
 
2002
 
Schertz, TX
 
—

 
984

 
213

 
—

 
1,197

 
—

 
12/27/2012
 
1994
 
Selma, TX
 
—

 
1,368

 
252

 
—

 
1,620

 
—

 
12/27/2012
 
2003
 
Silverdale, WA
 
—

 
1,144

 
1,777

 
—

 
2,921

 
2

 
12/27/2012
 
1995
West Marine
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Lauderdale, FL
 
 (f)

 
3,772

 
6,685

 
—

 
10,457

 
148

 
3/15/2012
 
2011
 
Harrison Township, MI
 
 (f)

 
666

 
2,623

 
—

 
3,289

 
50

 
4/30/2012
 
2009
West/East Valley Shopping Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Saginaw, MI
 
—

 
299

 
3,111

 
—

 
3,410

 
5

 
12/31/2012
 
2009
 
Saginaw (East), MI
 
—

 
729

 
19,679

 
—

 
20,408

 
33

 
12/31/2012
 
1996
Whittwood Town Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Whittier, CA
 
43,000

 
35,268

 
64,486

 
408

 
100,162

 
5,081

 
8/27/2010
 
2006
White Oak Village
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Richmond, VA
 
34,250

 
12,243

 
44,405

 
—

 
56,648

 
481

 
8/30/2012
 
2008
Whole Foods
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hinsdale, IL
 
5,710

 
4,227

 
6,749

 
—

 
10,976

 
491

 
5/28/2010
 
1999
Widewater Village
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Uniontown, PA
 
—

 
1,785

 
4,208

 
—

 
5,993

 
103

 
4/30/2012
 
2008
Winchester Station
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Winchester, VA
 
17,000

 
4,743

 
24,724

 
—

 
29,467

 
834

 
9/29/2011
 
2005
 
 
 
$
2,415,190

 
$
1,495,935

 
$
4,372,195

 
$
46,399

 
$
5,914,529

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(a) As of December 31, 2012, the Company owned 807 single-tenant retail properties, 120 single-tenant freestanding commercial properties, 70 multi-tenant retail properties, 16 office and industrial properties and one land parcel.
(b) The aggregate cost for federal income tax purposes is approximately $6.9 billion.










S-24

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(in thousands)


(c) The following is a reconciliation of total real estate carrying value for the years ended December 31:
 
 
 
2012
2011
2010
Balance, beginning of period
 
$
4,498,384

 
$
2,572,898

 
$
596,425

 
Additions
 
 
 
 
 
 
 
 
Acquisitions
 
1,743,548

 
1,922,180

 
1,975,533

 
 
Improvements
 
98,337

 
3,376

 
1,003

 
 
Adjustment to basis
 
—

 
—

 
—

 
Total additions
 
1,841,885

 
1,925,556

 
1,976,536

 
Deductions
 
 
 
 
 
 
 
 
Cost of real estate sold
 
(425,577
)
 
—

 
—

 
 
Other (including provisions for impairment of real estate assets)
 
(163
)
 
(70
)
 
(63
)
 
Total deductions
 
(425,740
)
 
(70
)
 
(63
)
Balance, end of period
 
$
5,914,529

 
$
4,498,384

 
$
2,572,898

(d) The following is a reconciliation of accumulated depreciation for the years ended December 31:
 
 
 
2012
2011
2010
Balance, beginning of period
 
$
98,707

 
$
28,868

 
$
3,178

 
Additions
 
 
 
 
 
 
 
 
Acquisitions - Depreciation Expense for Building, Acquisitions Costs & Tenant Improvements Acquired
 
109,614

 
69,756

 
25,672

 
 
Improvements - Depreciation Expense for Tenant Improvements and Building Equipment
 
919

 
83

 
18

 
Total additions
 
110,533

 
69,839

 
25,690

 
Deductions
 
 
 
 
 
 
 
 
Cost of real estate sold
 
(20,541
)
 
—

 
—

 
 
Other (including provisions for impairment of real estate assets)
 
—

 
—

 
—

 
Total deductions
 
(20,541
)
 
—

 
—

Balance, end of period
 
$
188,699

 
$
98,707

 
$
28,868


(e) The Company’s assets are depreciated or amortized using the straight-lined method over the useful lives of the assets by class. Generally, tenant improvements and lease intangibles are amortized over the respective lease term and buildings are depreciated over 40 years.
(f) Property is included in the Credit Facility’s underlying collateral pool of 309 commercial properties. As of December 31, 2012, the Company had $767.8 million outstanding under the Credit Facility.
(g) Subject to a ground lease and therefore date constructed is not applicable.




S-25

COLE CREDIT PROPERTY TRUST III, INC.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
(in thousands)

Mortgage Loans Receivable
 
Description
 
Location
 
Interest Rate as of December 31, 2012 (a)
 
Final Maturity Date
 
Periodic Payment Terms (b)
 
Prior Liens
 
Outstanding Face Amount of Mortgages (in thousands)
 
Carrying Amount of Mortgages (in thousands)(c)
Consol Energy Notes
 
Office
 
(d)
 
5.93%
 
10/1/2018
 
P & I
 
None
 
$
72,860

 
$
64,923

Junior Mezzanine Note
 
Retail
 
(e)
 
9.50%
 
7/1/2015
 
I
 
None
 
25,000

 
25,435

 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
97,860

 
$
90,358

(a) Represents the interest rate in effect under the loan as of December 31, 2012.
(b) P & I = Principal and interest payments; I = Interest only.
(c) The aggregate cost for Federal Income Tax purposes is $87.7 million
(d) The Consol Energy Notes are secured by two office buildings located in Pennsylvania.
(e) The Junior Mezzanine Note is secured by 15 commercial retail centers located in various states.
The following shows changes in the carrying amounts of mortgage loans receivable during the period (in thousands):
 
 
2012
 
2011
 
2010
Balance, beginning of period
 
$
64,683

 
$
63,933

 
$
—

Additions:
 
 
 
 
 
 
New mortgage loans
 
25,000

 
—

 
74,000

Discount on new mortgage loans and capitalized loan costs
 
—

 
—

 
(12,000
)
Acquisition costs related to investment in mortgage notes receivable
 
500

 
—

 
1,291

Deductions:
 
 
 
 
 
 
Collections of principal
 
(864
)
 
(276
)
 
—

Accretion of discount and amortization of premium and capitalized loan costs
 
1,039

 
1,026

 
642

Balance, end of period
 
$
90,358

 
$
64,683

 
$
63,933






S-26

SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 29th day of March 2013.
 
Cole Credit Property Trust III, Inc.
 
 
 
 
By:
/s/ D. KIRK MCALLASTER, JR.
 
 
D. Kirk McAllaster, Jr.
 
 
Executive Vice President, Chief Financial Officer and Treasurer
 
 
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
 
 
 
 
 
 
 
Signature
 
Title
 
Date
 
 
 
 
 
 
 /s/ CHRISTOPHER H. COLE

 
 Chairman, Chief Executive Officer and President

 
March 29, 2013
Christopher H. Cole
 
(Principal Executive Officer)
 
 
 
 
/s/ D. KIRK MCALLASTER, JR.

 
Executive Vice President, Chief Financial Officer and
 
March 29, 2013
 D. Kirk McAllaster, Jr.
 
Treasurer (Principal Financial Officer)
 
 
 
 
 /s/ SIMON J. MISSELBROOK

 
Senior Vice President of Accounting

 
March 29, 2013
Simon J. Misselbrook
 
(Principal Accounting Officer)
 
 
 
 /s/ MARC T. NEMER

 
 Director
 
March 29, 2013
 Marc T. Nemer
 
 
 
 
 
 /s/ THOMAS A. ANDRUSKEVICH
 
 
 Director
 
March 29, 2013
Thomas A. Andruskevich
 
 
 
 
 
 
 
 
 
 
 
 /s/ SCOTT P. SEALY, SR.
 
 
 Director
 
March 29, 2013
Scott P. Sealy, Sr.
 
 
 
 
 
 
 
 
 
 
 
 /s/ LEONARD W. WOOD
 
 Director
 
March 29, 2013
Leonard W. Wood
 
 
 
 



EXHIBIT INDEX
The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K for the year ended December 31, 2012 (and are numbered in accordance with Item 601 of Regulation S-K).
Exhibit No.
  
Description
 
 
 
2.1
 
Agreement and Plan of Merger, dated March 5, 2013, by and among Cole Credit Property Trust III, Inc., CREInvestments, LLC, Cole Holdings Corporation and the Holdings Stockholder (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K (File No. 000-53960), filed on March 8, 2013).
3.1
  
Third Articles of Amendment and Restatement of Cole Credit Property Trust III, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s pre-effective amendment to Form S-11 (File No. 333-149290), filed on September 29, 2008).
 
 
 
3.2
  
Amended and Restated Bylaws of Cole Credit Property Trust III, Inc. (Incorporated by reference to Exhibit 3.2 to the Company’s pre-effective amendment to Form S-11 (File No. 333-149290), filed on May 7, 2008).
 
 
 
3.3
  
Articles of Amendment (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 333-149290) filed on April 9, 2010).
 
 
 
3.4
  
Second Articles of Amendment of Cole Credit Property Trust III, Inc. (Incorporated by reference to Exhibit 3.4 to the Company’s post-effective amendment to Form S-11 (File No. 333-164884), filed on July 22, 2011).
 
 
 
3.5*
 
Certificate of Correction to Fifth Articles of Amendment and Restatement, filed January 25, 2013.
4.1
  
Form of Subscription Agreement and Subscription Agreement Signature Page (Incorporated by reference to Exhibit 4.1 to the Company’s post-effective amendment to Form S-11 (File No. 333-164884), filed January 18, 2012).
 
 
 
4.2
  
Form of Additional Investment Subscription Agreement (Incorporated by reference to Exhibit 4.2 to the Company’s post-effective amendment to Form S-11 (File No. 333-164884), filed January 18, 2012).
 
 
 
4.3
  
Form of Alternative Subscription Agreement (Incorporated by reference to Exhibit 4.3 to the Company’s post-effective amendment to Form S-11 (File No. 333-164884), filed January 18, 2012).
 
 
 
4.4
  
Form of Alternative Additional Investment Subscription Agreement (Incorporated by reference to Exhibit 4.4 to the Company’s post-effective amendment to Form S-11 (File No. 333-164884), filed January 18, 2012).
 
 
 
4.5
  
Form of Alternative Subscription Agreement (Incorporated by reference to Exhibit 4.5 to the Company’s post-effective amendment to Form S-11 (File No. 333-164884), filed April 22, 2011).
 
 
 
4.6
  
Form of Alternative Additional Investment Subscription Agreement (Incorporated by reference to Exhibit 4.6 to the Company’s post-effective amendment to Form S-11 (File No. 333-164884), filed April 22, 2011).
 
 
 
10.1
  
Property Management and Leasing Agreement by and among Cole Credit Property Trust III, Inc., Cole REIT III Operating Partnership, LP and Cole Realty Advisors, Inc. dated October 8, 2008 (Incorporated by reference to Exhibit 10.3 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on October 9, 2008).
 
 
 
10.2
  
[Reserved.]
 
 
 
10.3
  
Amended and Restated Agreement of Limited Partnership of Cole REIT III Operating Partnership, LP, by and between Cole Credit Property Trust III, Inc. and the limited partners thereto dated May 6, 2008 (Incorporated by reference to Exhibit 10.5 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on October 9, 2008).
 
 
 
10.4
  
Amended and Restated Distribution Reinvestment Plan (Incorporated by reference to Exhibit A to the Company’s registration statement on Form S-3 (File No. 333-180077), filed March 14, 2012).
 
 
 
10.5
  
Amended and Restated Advisory Agreement by and between Cole Credit Property Trust III, Inc. and Cole REIT Advisors III, LLC, dated October 1, 2010 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 333-164884), filed on October 7, 2010).
 
 
 
10.6
  
First Mortgage, Security Agreement and Fixture Filing, dated as of June 22, 2009, by and between Cole WM Albuquerque NM, LLC and Aviva Life and Annuity Company (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 333-149290), filed on June 26, 2009).
 
 
 


Exhibit No.
  
Description
 
 
 
10.7
  
Junior Mortgage, Security and Fixture Filing Agreement, dated as of June 22, 2009, by and between Cole WM Albuquerque NM, LLC and Aviva Life and Annuity Company (Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K (File No. 333-149290), filed on June 26, 2009).
10.8
  
Promissory Note, dated June 22, 2009, by and between Cole WM Albuquerque NM, LLC and Aviva Life and Annuity Company (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K (File No. 333-149290), filed on June 26, 2009).
10.9
  
First Deed of Trust, Security Agreement and Fixture Filing, dated as of June 22, 2009, by and between Cole MT Las Vegas NV, LLC and Aviva Life and Annuity Company (Incorporated by reference to Exhibit 10.4 to the Company's Form 8-K (File No. 333-149290), filed on June 26, 2009).
 
 
 
10.10
  
Promissory Note, dated June 22, 2009, by and between Cole MT Las Vegas NV, LLC and Aviva Life and Annuity Company (Incorporated by reference to Exhibit 10.5 to the Company's Form 8-K (File No. 333-149290), filed on June 26, 2009).
 
 
10.11
  
First Mortgage, Security Agreement and Fixture Filing, dated as of June 22, 2009, by and between Cole WG South Yale Avenue (Tulsa) OK, LLC and Aviva Life and Annuity Company (Incorporated by reference to Exhibit 10.6 to the Company's Form 8-K (File No. 333-149290), filed on June 26, 2009).
 
 
10.12
  
Promissory Note, dated June 22, 2009, by and between Cole WG South Yale Avenue (Tulsa) OK, LLC and Aviva Life and Annuity Company (Incorporated by reference to Exhibit 10.7 to the Company's Form 8-K (File No. 333-149290), filed on June 26, 2009).
 
 
10.13
  
First Deed of Trust, Security Agreement and Fixture Filing, dated June 22, 2009, by and between Cole WG Fredericksburg VA, LLC and Aviva Life and Annuity Company (Incorporated by reference to Exhibit 10.8 to the Company’s Form 8-K (File No. 333-149290), filed on June 26, 2009).
 
 
10.14
  
Promissory Note, dated June 22, 2009, by and between Cole WG Fredericksburg VA, LLC and Aviva Life and Annuity Company (Incorporated by reference to Exhibit 10.9 to the Company's Form 8-K (File No. 333-149290), filed on June 26, 2009).
 
 
10.15
  
Loan Agreement dated August 31, 2009, by and between Jackson National Life Insurance Company, as Lender and Cole HD San Diego CA, LP; Cole HT Durham NC, LLC; Cole KO Monrovia CA, LP; COLE HH North Charleston SC, LLC; Cole WG Edmond OK, LLC; Cole CV Southaven MS, LLC; Cole KO Tavares FL, LLC; Cole BB Coral Springs FL, LLC, collectively as Borrowers (Incorporated by reference to Exhibit 10.43 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.16
  
Fixed Rate Promissory Note dated August 31, 2009 by and between Jackson National Life Insurance Company, as Noteholder and Cole HD San Diego CA, LP; Cole HT Durham NC, LLC; Cole KO Monrovia CA, LP; COLE HH North Charleston SC, LLC; Cole WG Edmond OK, LLC; Cole CV Southaven MS, LLC; Cole KO Tavares FL, LLC; Cole BB Coral Springs FL, LLC collectively as Maker (Incorporated by reference to Exhibit 10.44 to the Company's post-effective amendment to Form S-11 (File No. 333- 149290), filed on November 2, 2009).
 
 
10.17
  
Affiliated Party Subordination and Cross-Default Agreement dated August 31, 2009 by and between Cole REIT III Operating Partnership and Jackson National Life Insurance Company (Incorporated by reference to Exhibit 10.45 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.18
  
Deed of Trust and Absolute Assignment of Rents and Leases and Security Agreement and Fixture Filing dated as of August 31, 2009 by and between Cole CB Abilene TX, LLC and J. Edward Blakey as Trustee for the benefit of Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.46 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.19
  
Promissory Note dated as of August 31, 2009 by and between Cole CB Abilene TX, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.47 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.20
  
Deed to Secure Debt and Absolute Assignment of Rents and Leases and Security Agreement dated as of August 31, 2009 by and between Cole CB Braselton GA, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.48 to the Company’s post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.21
  
Promissory Note dated as of August 31, 2009 by and between Cole CB Braselton GA, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.49 to the Company’s post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 


Exhibit No.
  
Description
 
 
 
10.22
  
Deed to Secure Debt and Absolute Assignment of Rents and Leases and Security Agreement dated as of August 31, 2009 by and between Cole CB Bremen GA, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.50 to the Company’s post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
 
10.23
  
Promissory Note dated as of August 31, 2009 by and between Cole CB Bremen GA, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.51 to the Company’s post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.24
  
Deed of Trust, Absolute Assignment of Rents and Leases and Security Agreement (and Fixture Filing) dated as of August 31, 2009 by and between Cole CB Bristol VA, LLC and Alexander Title Agency Incorporated as Trustee for the benefit of Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.52 to the Company’s post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.25
  
Promissory Note dated as of August 31, 2009 by and between Cole CB Bristol VA, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.53 to the Company’s post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.26
  
Deed to Secure Debt and Absolute Assignment of Rents and Leases and Security Agreement dated as of August 31, 2009 by and between Cole CB Columbus GA, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.54 to the Company’s post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.28
  
Deed of Trust, Absolute Assignment of Rents and Leases and Security Agreement (and Fixture Filing) dated as of August 31, 2009 by and between Cole CB Emporia VA, LLC and Alexander Title Agency Incorporated as Trustee for the benefit of Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.56 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.29
  
Promissory Note dated as August 31, 2009 by and between Cole CB Emporia VA, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.57 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.30
  
Mortgage and Absolute Assignment of Rents and Leases and Security Agreement (and Fixture Filing) dated as of August 31, 2009 by and between Cole CB Fort Mill SC, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.58 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.31
  
Promissory Note dated as of August 31, 2009 by and between Cole CB Fort Mill SC, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.59 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.32
  
Deed of Trust, Absolute Assignment of Rents and Leases and Security Agreement (and Fixture Filing) dated as of August 31, 2009 by and between Cole CB Greensboro NC, LLC and J. Edward Blakey as Trustee for the benefit of Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.60 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.33
  
Promissory Note dated as of August 31, 2009 by and between Cole CB Greensboro NC, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.61 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.34
  
Deed of Trust, Absolute Assignment of Rents and Leases and Security Agreement (and Fixture Filing) dated as of August 31, 2009 by and between Cole CB Mebane NC, LLC and J. Edward Blakey as Trustee for the benefit of Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.62 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.35
  
Promissory Note dated as of August 31, 2009 by and between Cole CB Mebane NC, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.63 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.36
  
Mortgage and Absolute Assignment of Rents and Leases and Security Agreement (and Fixture Filing) dated as of August 31, 2009 by and between Cole CB Piedmont SC, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.64 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.38
  
Deed of Trust, Absolute Assignment of Rents and Leases and Security Agreement (and Fixture Filing) dated as of August 31, 2009 by and between Cole CB Rocky Mount NC, LLC and J. Edward Blakey as Trustee for the benefit of Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.66 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
 
 


Exhibit No.
  
Description
 
 
 
10.39
  
Promissory Note dated as of August 31, 2009 by and between Cole CB Rocky Mount NC, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.67 to the Company’s post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
 
10.40
  
Deed of Trust and Absolute Assignment of Rents and Leases and Security Agreement (and Fixture Filing) dated as of August 31, 2009 by and between Cole CB San Antonio TX, LLC and J. Edward Blakey as Trustee for the benefit of Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.68 to the Company’s post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.41
  
Promissory Note dated as of August 31, 2009 by and between Cole CB San Antonio TX, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.69 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.42
  
Deed of Trust and Absolute Assignment of Rents and Leases and Security Agreement (and Fixture Filing) dated as of August 31, 2009 by and between Cole CB Sherman TX, LLC and J. Edward Blakey as Trustee for the benefit of Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.70 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.43
  
Promissory Note dated as of August 31, 2009 by and between Cole CB Sherman TX, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.71 to the Company’s post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.44
  
Deed of Trust and Absolute Assignment of Rents and Leases and Security Agreement (and Fixture Filing) dated as of August 31, 2009 by and between Cole CB Waynesboro VA, LLC and Alexander Title Agency as Trustee Incorporated for the benefit of Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.72 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.45
  
Promissory Note dated as of August 31, 2009 by and between Cole CB Waynesboro VA, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.73 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.46
  
Deed of Trust and Absolute Assignment of Rents and Leases and Security Agreement (and Fixture Filing) dated as of August 31, 2009 by and between Cole CB Woodstock VA, LLC and Alexander Title Agency Incorporated as Trustee for the benefit of Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.74 to the Company’s post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.47
  
Promissory Note dated as of August 31, 2009 by and between Cole CB Woodstock VA, LLC and Wells Fargo Bank, NA (Incorporated by reference to Exhibit 10.75 to the Company's post-effective amendment to Form S-11 (File No. 333-149290), filed on November 2, 2009).
 
 
10.48
  
Borrowing Base Revolving Line of Credit Agreement dated as of December 16, 2009 by and between Cole REIT III Operating Partnership, LP and certain of its wholly-owned subsidiaries, collectively as Borrower, and TCF National Bank, a national banking association. (Incorporated by reference to Exhibit 10.76 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed on January 29, 2010).
 
 
10.49
  
Deed of Trust and Security Agreement dated as of December 18, 2009 by and between Cole HD Winchester VA, LLC and Manus E. Holmes Incorporated as Trustee for the benefit of Peoples United Bank, a federally chartered banking corporation. (Incorporated by reference to Exhibit 10.77 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed on January 29, 2010).
 
 
10.50
  
Mortgage and Security Agreement dated as of December 18, 2009 by and between Cole TS Gloucester NJ, LLC and Peoples United Bank, a federally chartered banking corporation. (Incorporated by reference to Exhibit 10.78 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed on January 29, 2010).
 
 
 
10.51
  
Promissory Note dated December 18, 2009 by and between Peoples United Bank, a federally chartered banking corporation, as Lender and Cole TS Gloucester NJ, LLC and Cole HD Winchester VA, LLC, collectively as Borrowers. (Incorporated by reference to Exhibit 10.79 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed on January 29, 2010).
 
 
10.52
  
Loan Agreement dated December 22, 2009 by and between Jackson National Life Insurance Company, as Lender and Cole HD Tucson AZ, LLC, Cole MT Flagstaff AZ, LLC, Cole WG Goose Creek SC, LLC, Cole PX Mountain Brook AL, LLC, Cole TS Irmo SC, LLC, Cole LO Kansas City MS, LLC and Cole KO Columbia SC, LLC, collectively as Borrowers. (Incorporated by reference to Exhibit 10.80 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed on January 29, 2010).
 
 


Exhibit No.
  
Description
 
 
 
10.53
  
Fixed Rate Promissory Note dated December 22, 2009 by and between Jackson National Life Insurance Company, as Noteholder and Cole HD Tucson AZ, LLC, Cole MT Flagstaff AZ, LLC, Cole WG Goose Creek SC, LLC, Cole PX Mountain Brook AL, LLC, Cole TS Irmo SC, LLC, Cole LO Kansas City MS, LLC and Cole KO Columbia SC, LLC, collectively as Maker. (Incorporated by reference to Exhibit 10.81 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed on January 29, 2010).
 
 
10.54
  
Borrowing Base Revolving Line of Credit Agreement dated as of January 6, 2010 by and between Cole REIT III Operating Partnership, LP and certain of its wholly-owned subsidiaries, collectively as Borrower and JPMorgan Chase Bank, N.A., as Administrative Agent, US Bank National Association, as Sole Syndication Agent, RBS Citizens, N.A., D/B/A Charter One, as Co-Documentation Agent, Comerica Bank, as Co-Documentation Agent and J.P. Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger. (Incorporated by reference to Exhibit 10.82 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed on January 29, 2010).
 
 
10.55
  
First Deed of Trust, Security Agreement and Fixture Filing dated as of January 27, 2010 by and between Cole MT Austin TX, LLC and Bryan E. Loocke as Trustee for the benefit of Aviva Life and Annuity Company. (Incorporated by reference to Exhibit 10.83 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed on January 29, 2010).
 
 
10.56
  
Promissory Note, dated January 27, 2010, by and between Cole MTAustin TX, LLC and Aviva Life and Annuity Company. (Incorporated by reference to Exhibit 10.84 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed on January 29, 2010).
 
 
10.57
  
Loan Agreement, dated April 1, 2010, by and between Cole Credit Property Trust III, Inc., and certain of its wholly-owned subsidiaries, collectively as Borrower, and The Royal Bank of Scotland PLC as lender. (Incorporated by reference to Exhibit 10.85 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed on April 16, 2010).
 
 
10.58
  
Loan Agreement, dated April 1, 2010, by and between Cole Mezzco CCPT III, LLC as Borrower, and RCG LV Debt IV REIT, LP as lender. (Incorporated by reference to Exhibit 10.86 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed on April 16, 2010).
 
 
10.59
  
Purchase and Sale Agreement dated as of April 30, 2010 by and between City Center Bellevue Development LLC and Cole MT Bellevue WA, LLC. (Incorporated by reference to Exhibit 10.76 to the Company's pre-effective amendment on Form S-11 (File No. 333-164884) filed on May 13, 2010).
 
 
10.60
  
Loan Agreement dated May 19, 2010 by and between Cole Credit Property Trust III, Inc., as Borrower and JPMorgan Chase Bank, N.A., as Lender (Incorporated by reference to Exhibit 10.88 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed August 2, 2010).
 
 
10.61
  
Loan Agreement dated June 4, 2010 by and between Cole Credit Property Trust III, Inc. as Borrower and Goldman Sachs Commercial Mortgage Capital, L.P., as Lender (Incorporated by reference to Exhibit 10.89 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed August 2, 2010).
 
 
 
10.62
 
Loan Agreement dated as of July 30, 2010 by and between Cole MT Bellevue WA, LLC as Borrower and Wells Fargo Bank, National Association as Lender, administrative agent, sole book runner and lead arranger (Incorporated by reference to Exhibit 10.90 to the Company's post-effective amendment to its Registration Statement on Form S-11 (File No. 333-149290), filed August 3, 2010).
 
 
10.63
 
Loan Agreement dated August 25, 2010 by and between Cole AT Dallas TX, LLC, Cole IG Katy TX, LLC, Cole CI Plano TX, LLC, Cole XP Schaumburg IL, LLC and Cole HD Tolleson AZ, LLC, collectively as Borrower and Wells Fargo Bank, National Association as Lender, Administrative Agent, Syndication Agent, Documentation Agent and Sole Book Runner and Lead Arranger (Incorporated by reference to Exhibit 10.91 to the Company's pre-effective amendment to Form S-11 (File No. 333-164884), filed on September 17, 2010).
 
 
10.64
 
Agreement for Purchase and Sale of Real Estate dated September 12, 2010 by Cole REIT III Operating Partnership, LP as Purchaser and Albertson's LLC and certain of its wholly-owned entities, collectively as Seller (Incorporated by reference to Exhibit 10.92 to the Company's pre-effective amendment to Form S-11 (File No. 333-164884), filed on September 17, 2010).
 
 
10.65
 
Loan Agreement dated December 15, 2010 by and between Cole Credit Property Trust III, Inc., as Borrower and JPMorgan Chase Bank, National Association as Lender (Incorporated by reference to Exhibit 10.65 to the Company's Annual Report on Form 10-K (File No. 000 53960), filed on March 31, 2011).


Exhibit No.
  
Description
 
 
 
 
 
10.66
 
Credit Agreement dated June 27, 2011 by and between Cole REIT III Operating Partnership, LP as Borrower and Bank of America, National Association as Administrative Agent, Swing Line Lender and LIC Issuer, JP Morgan Chase Bank, National Association as Syndication Agent, U.S. Bank National Association, Wells Fargo Bank, National Association and Regions Bank as Co-Documentation Agents and Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC as Joint Lead Arrangers and Joint Book Managers (Incorporated by reference to Exhibit 10.66 to the Company's post-effective amendment to Form S-11 (File No. 333-164884), filed on July 22, 2011).
 
 
10.67
 
First Amendment to Credit Agreement dated December 6, 2011 by and between Cole REIT III Operating Partnership, LP as Borrower and Bank of America, National Association as Administrative Agent, Swing Line Lender and L/C Issuer (Incorporated by reference to Exhibit 10.67 to the Company's post-effective amendment to Form S-11 (File No. 333-164884), filed on January 18, 2012).
 
 
10.68
 
First Amendment to the Amended and Restated Advisory Agreement by and between Cole Credit Property Trust III, Inc. and Cole REIT Advisors III, LLC, dated November 9, 2011 (Incorporated by reference to Exhibit 10.68 to the Company's post-effective amendment to Form S-11 (File No. 333-164884), filed on January 18, 2012).
 
 
 
10.69*
 
Employment Agreement, dated as of March 26, 2013, by and among Cole Credit Property Trust III, Inc., Cole REIT III Operating Partnership, LP and Christopher H. Cole.
 
 
 
10.70*
 
Employment Agreement, dated as of March 26, 2013, by and among Cole Credit Property Trust III, Inc., Cole REIT III Operating Partnership, LP and Marc T. Nemer.
 
 
 
14.1
 
Cole Credit Property Trust III, Inc. Code of Business Conduct and Ethics (Incorporated by reference to the Company's pre-effective amendment on Form S-11 (File No. 333-149290), filed September 29, 2008).
 
 
21.1*
 
List of Subsidiaries (Incorporated by reference to Exhibit 21.1 to the Company's pre-effective amendment to Form S-11 (File No. 333-149290), filed on September 29, 2008).
 
 
23.1*
 
Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
 
 
31.1*
 
Certification of the Chief Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14 (a) or 15d-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
 
 
31.2*
 
Certification of the Chief Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14 (a) or 15d-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
 
 
32.1**
 
Certification of the Chief Executive Officer and Chief Financial Officer of the Company pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
 
 
101.INS***
 
XBRL Instance Document.
 
 
101.SCH***
 
XBRL Taxonomy Extension Schema Document.
 
 
101.CAL***
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
101.DEF***
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
101.LAB***
 
XBRL Taxonomy Extension Label Linkbase Document.
 
 
101.PRE***
 
XBRL Taxonomy Extension Presentation Linkbase Document.
________________


*
Filed herewith.
 
 
**
In accordance with Item 601(b) (32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
 
 
***
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.